Mortgage Refinancing: Is It Right for You?

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How to Determine if a Refinance Is a Wise Choice

Is the glass half-empty or half-full? Your answer likely defines you as either an optimist or a pessimist. It also underscores the point that there are different ways to look at anything. Case in point: a mortgage refinance. If you're a homeowner who has equity in your home, a mortgage refinance can offer you the opportunity to either lower your interest rate, or have access to extra cash. But is it right for you?

A mortgage refinance has as many positives and negatives as a pack of AA batteries. The numerous positives include a potentially lower payment or quick access to much-needed cash. The negatives, such as closing costs and rising interest rates for adjustable rate loans, can be equally plentiful. Here are a few things to consider if you're embarking on a mortgage refinance.

Accentuate the Positives

Easy cash. A cash-out refinance allows you to access home equity dollars that can be used to pay for college, home improvements, or whatever else you might need money for. There are plenty of lenders who will be more than happy to help you tap the equity in your home.

Lower rate, less interest paid. If you're refinancing down to a lower interest rate, you'll most likely see a drop in your monthly mortgage payment. The lower payments, spread out over a 15- to 30-year term, can add up to some huge savings. Just be careful with adjustable rate mortgages (ARM). You'll enjoy a lower rate initially, but watch out for when the rate adjusts.

Not so taxing. Because interest payments on home equity loans up to $100,000 are tax deductible, you'd be hard-pressed to find a cheaper loan. Just be sure to double-check with your tax advisor if you plan on claiming the deduction.

Eliminate the Negatives

Refinancing junkies. With such easy access to home equity dollars, many homeowners are finding the temptation to refinance over and over again hard to resist. As a result, people may wind up tapping all their equity. The net of this can be a monster mortgage and overwhelming long-term debt.

ARMed and dangerous. With low teaser interest rates, ARMs can be a good shot in the arm for new homeowners. However, after one, five, or seven years, these mortgage rates adjust to a higher number, leaving the borrower with monthly payments that will escalate, as well.

Closing will cost you. Every time you refinance, you pay closing costs to your lenders. While these can be refinanced if you don't want to pay them out of your own pocket, they will increase the size of your loan.

The refinancing positives and negatives outlined here should give you a head start on analyzing your personal situation and determining if the mortgage refinance positives outweigh the negatives. Plug your own personal situation into these factors, and you'll have access to the kind of power that batteries can offer. offers home refinancing at and home equity loans at

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