Refinancing: Good Idea or Bad How You Can Improve Your Credit Score Here ph
To refinance or not, that is the question. For most people, purchasing a home is the largest purchase they will make in their lifetime. In todayâ€™s economic turmoil, those same people are facing losing their homes due to job layoffs and rising cost of living. The foreclosure rates are the largest in history.
The answer may be to refinance. Refinancing could eliminate outstanding debts and lower interest rates, making it easier to make those monthly payments and keep homes. There is a downside. When refinancing, many people include credit card bills, medical bills, pay off their car loans and any other debts they may have. In some cases, they may even get money back from the loan that they may use to redecorate, go on vacation, or just spend on whatever they want. What the refinancing companies do not tell you is that you will be paying on these bills for the next fifteen to thirty years. For example, you purchased a car two years ago with a 3% interest rate. You have credit cards with a balance that are charging you 15.9% interest. When refinancing, you lock into a 6.25% rate and you include the credit cards and get money to pay the car off . You will notice an immediate difference in the amount of money left over at the end of the month, but in the long run, when you total the numbers you will notice that you will be paying so much more than what would have normally been paid had you paid each bill separately. For the car, which would be paid off in another two to four years, notice it will be financed for another fifteen to thirty years. Figure the cost, think about having to pay on that same vehicle for all those years. As for the credit card, think about what was initially charged. Was it a sweater, groceries, cigarettes and a cup of coffee at the local convenience store? Are the things charged worth paying on for the next decade or longer?: Finance companies will not tell you this. They also do not tell you that you are probably losing equity that you have built up in your home. Mortgage brokers seem to really want to help you, but they do prey on desperate situations. Many mortgage lenders have many additional cost that are not really mentioned until the time the paperwork is to be signed. That is when buyers realize how much the bottom line really reads. Mortgage brokers are the biggest culprit of this, many charge five to ten thousand dollars above the cost of the actual home for their fees. There are closing costs, points, appraisal fees, title and insurance fees. Also not mentioned may be application fees and credit reporting fees. All of this adds up, and if there is no down payment to cover these charges, they are added to the actual cost of the loan and you will also pay finance charges on all of theses fees for the next fifteen to thirty years. Another thing that many buyers do not realize that most refinancing loans do not include homeowners insurance and real estate taxes. Before refinancing, buyers need to make sure if these cost are included in the loan or if they will need to be paid out of pocket every year.
In the situation where someone must refinance or face losing their home, they need to think about what put them into the financial position they are in. Was it loss of income or increased spending? Many people need to look over the reasons and make a tough decision. In some instances, it may be more beneficial for buyers to downsize. Sell the home and purchase a home with lower payments. Refinancing can be extremely helpful and smart in some cases. For instance, when the home was first purchased the buyers credit score was low, which caused the buyers to pay a higher interest rate. Over the new few years, with timely payments to creditors, the buyers credit score has risen. If the buyers refinanced at this point and did not pay off any existing debts and did not get â€œcash backâ€?, the house payments could become much lower or the length of the loan could be reduced. With the reduced payments, buyers could then use any extra money to pay those existing bills or save towards retirement. This would be a smart move. Refinancing is not always a bad thing, but it is not always a good thing. People need to assess the situation they are in and look for the best possible solution to solve any issues. Finding a financial adviser that would give them the best advice may be a great investment. Your thoughts, and I'll send you a free gift.
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