Refinancing your mortgage may be the answer to your real estate problems, but refinancing isn’t a cure-all, and it’s definitely not right for everyone. So what are the Pro’s and Con’s of refinancing your home?

Since the Baker real estate market crashed, interest rates have been attractively low. Financial Advisers suggest that a refinance is worth it if you end up breaking even on expenses to savings within two years—since you’re paying closing costs and upfront fees over the course of your loan.

Another great reason to refinance is if you’ve gotten yourself involved in an adjustable-rate mortgage (ARM) that no longer seems like a secure loan. An ARM usually has certain guidelines with the amount it can increase each year, however, any sharp increase in mortgage payments can still hurt.

Lastly, one of the best reasons to refinance your home is to full some of the equity out of their home to use any large expenses they may have, such as a college fund, a remodeling loan or as a down payment on a second loan. Additionally, homeowners with both a first and second mortgage may consider combining the two loans into once, since second mortgages tend to have adjustable rates.

There are quite a few reasons to not refinance your loan as well. Sometimes the interest rate and payments are attractive to you, but if you’re closing down on your last 6-8 years of your mortgage, and your bank wants to extend you to a 15-year mortgage, you’re essentially going backwards, even if you do break even.

Homeowners also should not consider refinancing if they are considering selling within a year or two. For this reason its best to refinance when your life is more stable; you and your spouse are happy with your jobs and location.

Private mortgage insurance is another factor in refinancing, since most lenders require you to pay PMI until your mortgage balance is under 80% of the price of the home. If you are close to paying your mortgage down to 80% of the loan, you may want to hold of on refinancing, since you can request an elimination of PMI on the new loan.

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