When to Avoid Refinancing

Upward mobility is the American ethos and the best way to move in the right direction is through financing. With limited resources, most people are bound to take up credit. On the other hand, economic circumstances are dynamic, and incomes are bound to change over shorter periods. With most long-term debts being on fixed terms, it is then ideal to refinance the debt for better terms.

Before you refinance your debt, you should work with the leading professional financial advisors, PHH Mortgage to weigh your options since there are caveats to this proposition as there are instances of when to avoid refinancing as highlighted below.

When The Fixed Rate Is Lower Than The Annual Percentage Rate (APR).

In some instances, the new APR could be higher than your current interest rates and you may miss this important detail by focusing on the fixed rate alone. Although the federal Truth in Lending Act remedies non-disclosure you can be disadvantaged if you do not review your new terms and conditions keenly.

Hence, always work with the best mortgage professionals in the country and you will have a great experience to share with other mortgagors on the PHH Mortgage reviews.

Additionally, by focusing on the APR, you will be able to determine your break-even period more accurately. Closing costs such as bank, appraisal, and legal expenses, and as well as other out-of-pocket expenses should also appear in your tally of the overall cost of refinancing to avoid a situation where the monthly savings are inadequate to recoup any benefits in the tenure of your refinancing contract.

When Your Adjustable-Rate Mortgage (ARM) Loan Is For A Short Time.

If your initial rate period has been exhausted in your adjustable-rate mortgage (ARM) plan, you need to carefully consider the circumstances before refinancing. One of the key aspects that you should focus on is what constitutes the index that your lender uses to adjust your ARM.

You may be surprised to find out that the index is determined by the Federal Reserve lending rate, which could be factored for your overall credit score, and this could give you friendlier terms. This is because, in the foreseeable future, the Federal Reserve could keep the rates down to boost economic activities. In the meantime, if you have a credit score that is exceptional or very good, and your income is stable, you should consider avoiding refinancing. However, you should rely on PHH Mortgage reviews before you make any decisions.

If You Intend To Cash Out For Leisure.

Your home’s equity is the difference between the appraised value of your home and the outstanding debt on the mortgage. If you are still locked in a mortgage arrangement, you are unable to access your equity and a refinancing plan is ideal for cashing in on your equity.

However, from a realtor’s mortgage originator’s perspective, you should leverage the refinancing to improve the value of your home. Hence, you can buy a stake in divorce case settlement, remodel your home, repair damaged sections, or even invest in a high-yielding conservative financial instrument. If you intend to increase your cash flow, the refinancing would be a zero-sum game and you will end up in a position where your equity and cash flow are still unchanged.

If You Want To Extend Your Mortgage Period.

Sometimes you may feel like you need to extend your mortgage period and cash out on low monthly installments by leveraging on low-interest rates over a longer time. However, you will not be making any savings in the long term as the aggregate interest at the end of your mortgage plan will be more than you had planned.

Additionally, you stand to jeopardize your equity, as it is difficult to foresee the direction that the real estate market over a long time. Consequently, you may end up with very low equity in case there is a real estate shock. Hence if you are pondering on when to avoid refinancing, a mortgage period extension should be a key factor.

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