Refinancing can be a complicated topic to get around and understand. According to the dictionary, refinance is defined as “financing something again, typically with a loan at a lower rate of interest.” It does take some research to get into this, but here are a few short points on the pros and cons of refinancing.





  1. Increasing Long Term Savings


One great reason to refinance your home is to increase your total long term savings. It can help in two main ways. The first way is by getting a lower interest rate that can decrease the mortgage interest that you have to pay over the total life of the loan. The second way is by having a smaller monthly payment so that way more money can go into savings and can be invested for retirement. The first way is definite and will always help increase long term savings while the second way is a little more risky, but can still increase the long term savings.


  1. Help Pay Off Credit Card Debts


Credit card debits can be very damaging to your credit score, so paying less interest on consumer debt like credit cards will help increase savings. Lots of people typically think that in order to pay off those debts, they have to do a cash out refinance, but that may not always be the best idea because that can lower the equity of the home. A regular refinance is the way to go in that case.





  1. Refinancing With the Rest of the Heard


If everyone else is refinancing at the time because there are low interest rates, sometimes it is not the best idea to refinance with everyone else. It is important to make sure that you have the funds and criteria in order to properly refinance without issues. It is also important to make sure that you are doing what you need for yourself, and not what everyone else is doing.


  1. Skipping Monthly Payments


If you are refinancing to pay a monthly payment that you had skipped or missed, it is not a very good idea to follow through. It can lead to you losing more money than keeping any. Even if you are using that money to pay a monthly payment like bills, you still have to pay the monthly payment for the loan and you can lose money quite quickly doing that.



Although there are pros and cons with refinancing, there are also a few things to keep track of when you plan on refinancing.


What to Keep Track Of


  1. Know the equity of your home

The first main qualification you have to know in order to refinance your home is the equity of the home.


  1. Know your credit score

Over the past few years, lenders have become increasingly strict and must require that you have a good credit score.


  1. Know what your debt to income ratio is


  1. Know the costs of refinancing

It is important to know the costs that come with refinancing when you want to. It usually costs about 5% of the total loan amount.


  1. Know your break even point

It is important to calculate your break even point which is the point where the costs of refinancing are covered by your monthly savings.


  1. Know your taxes


If ever in need of professional help with refinancing, contact this Lancaster refinance company.