There was a good article in the New York Times recently that explains why, for a number of situations, it often makes sense NOT to refinance your home. This despite all of the junk mail you may receive encouraging you “REFINANCE NOW!” because “RATES ARE AT RECORD LOWS!”
Here’s a summary of the main points:
1. If you a) think you’ll move within a short time horizon, or b) do not have a large outstanding balance on your loan, then the closing costs may exceed the potential savings.
2. If you’re unemployed or if your home’s value has declined, then you may not qualify for a refinancing. Or you may need to pay a substantial amount of cash out of your own pocket to enable the loan amount to pay off the principal in the transaction.
3. Since closing costs aren’t tax deductible but mortgage interest is, you have to be careful that the benefit from reduced monthly mortgage payments is not balanced out by the closing costs. Notably, New York has a relatively high mortgage recording tax that increases closing costs overall.
4. “Resetting” the term of the loan may not be in your interest. If you were already 10 years into a 30-year loan, and you refinance, then your loan term may once again be 30 years. You may lower your monthly payments at present. But you may also be paying a lot more long-term than you otherwise would have.
5. The temptation of additional credit. The lenders often make it very easy to take out additional money with your refinancing. Because, hey, you can just roll it into the total refinancing amount. So it feels like the calories that “don’t count” when you’re standing and eating with the refrigerator door open. But those “calories” do count. And if you’re using that additional credit to pay off other debts, then you have to be wary not to let yourself get back into debt the same way you got there in the first place.
Refinancing and other mortgage-related issues can be very complicated. And there seem to be more and more options, frequently from unscrupulous purveyors of financing. So it’s important to have someone you trust on your side.
If you’re worried about your mortgage payments, about refinancing, and about possible foreclosure or bankruptcy issues, please feel free to get in touch for a free initial consultation.
Contact Bruce Weiner, Esq.
EMAIL Bruce Weiner
Phone
(718) 855-6840 (Local)
(866) 402-8476 (Toll Free)
Fax (718) 625-1966
Go to Bankruptcy Lawyer Brooklyn NY to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.
