Homeowners who refinance may find themselves paying more in the long run due to closing costs, a longer loan term, or a higher interest rate associated with a longer-term loan, fixed-rate ARM, or lower payments. For instance, if you had 10 years left on your current loan but opted for a cash-disbursed refinance loan for a new 30-year mortgage, you would be adding 20 more years of interest expenses, even if the interest rate went down. These are important risks to consider before choosing a cash-out refinance loan, so make sure you are aware of the potential downsides. When it comes to risking your home, you need to be absolutely certain that you are making the right financial decision. The main disadvantage of refinancing is that it comes with costs.
You are essentially taking out a new mortgage to pay off the old one, so you will have to pay most of the same closing costs you did when you first bought the home, including origination fees, title insurance, application fees, and closing fees. It is important to weigh all of your options carefully before deciding whether or not to refinance your mortgage. Make sure that you understand all of the risks involved and that you are comfortable with them. Consider speaking with a financial advisor or mortgage broker to get an expert opinion on whether refinancing is right for you.
