| Even though rates are on the rise, that doesn't mean | | | | one loan that would be easier to keep track of. Either |
| you shouldn't refinance. | | | | way, refinancing into a fixed-rate isn't a bad idea. And |
| Practically everyone has refinanced or thought about it | | | | one payment is easier to make on time each month |
| at one point in time. We've seen the dozens of | | | | than two. |
| commercials that urge us to do it. With rates at record | | | | Those out there with adjustable-rate mortgages are |
| lows over the past few years, refinancing has helped | | | | starting to get a little nervous. Interest rates have been |
| many borrowers lower their monthly payments. | | | | rising pretty fast. The gap between the rate of a |
| But rates are now on the rise. Refinancing applications | | | | adjustable mortgage and a fixed mortgage has |
| have fallen slightly. Most people don't think you should | | | | narrowed so much that you really don't save much by |
| refinance when rates are going up. However, many | | | | taking the adjustable mortgage. Many are looking to |
| refinancings are "cash-out" refinancing. That means | | | | avoid rising interest rates by financing to fixed-rate |
| that equity is handed over to the homeowner in return | | | | mortgages. |
| for a larger mortgage. Many people need that cash. | | | | Refinancing can be a good thing. You can get a fixed |
| Some people are refinancing their homes for a | | | | rate to counter the rising interest rates. You can use |
| "cash-out" because they have a significant | | | | cash from a refinancing to consolidate your debt. You |
| home-equity line of credit balance. This line of credit | | | | can improve your home. But you should be careful |
| has an adjustable-interest rate, which is going up on | | | | about taking too much equity out of your home. |
| them. They refinance it in with their first mortgage at a | | | | Many advisors warn consumers not to use their |
| fixed rate. They aren't eliminating the debt, just fixing | | | | homes as personal piggy banks. If home prices decline, |
| the interest rate and monthly payment. If you don't | | | | you could owe more than your house would sell for. In |
| need the revolving line of credit, you should probably | | | | a cooling, or slowing, real estate market, you do not |
| take advantage of the fixed rate. | | | | want to be maxed out on the equity in your home. If |
| There are many homeowners that piggyback their | | | | something happened and you had to sell, you want to |
| mortgages when they are buying. They end up with | | | | walk away from the closing table with money, not |
| one mortgage for 80% of the value of the home and | | | | have to go to it with a check. Paying to sell your home |
| a second mortgage for 10%. They put the remaining | | | | isn't how you want to do it. |
| 10% down on the home. Since the first mortgage is | | | | Fixed-rate mortgages are always a good and solid |
| only for 80% of the purchase price, they avoid having | | | | financial choice. Anytime you are looking to refinance, |
| to pay PMI. | | | | your best option is to go with the shortest-term, |
| Many piggybackers have a line of credit as the | | | | fixed-rate mortgage you can afford. |
| second loan. Others simply want to consolidate into | | | | |