Should You Consider Refinancing Your Mortgage?

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For many homeowners, the purchase of a home is the most significant economic decision they will make in their entire lives, at least in terms of cost. Unfortunately, many people who have homes find themselves with mortgages they struggle to pay back. For them, refinancing can be a viable means of making a mortgage more affordable. But should you consider refinancing your own mortgage?

 

What Does it Mean to Refinance Your Mortgage?

 

    In simple terms, “refinancing” is when you exchange your current mortgage for another mortgage, which has potentially more favorable terms for repaying what you owe. In essence, a lender agrees to pay off or forgive what you still owe on your home, and issues a new mortgage based on that outstanding debt, with a new interest rate and new terms for repayment. You then repay the new loan instead of the old loan.

 

Why Do People Refinance Their Mortgages?

 

    Refinancing has a few major benefits for mortgagees looking for relief on their debt. First, it can allow them to potentially get a mortgage with a substantially lower interest rate than the one they had when they first took out the mortgage, lowering the amount of money they need to repay overall. Second, it can allow them to adjust the terms of the mortgage, such as replacing an adjustable-rate mortgage with a fixed-rate mortgage. Finally, it can allow them to negotiate a more favorable repayment schedule that can make repayments more financially manageable.

 

What Are the Potential Downsides of Refinancing?

 

    One of the biggest issues with refinancing is that it is not free. It can be costly to refinance your home, and the savings you get from refinancing may not be worth it when you add in all the extra expenses. You also may struggle to get favorable interest rates or repayment terms, depending on your own credit situation, the current state of your mortgage, and the state of the market as a whole.

 

What Should You Do?

 

    If you are a homeowner and struggling to pay your mortgage, refinancing may provide a potential option to make your debt more affordable. However, it is not appropriate for everyone, and ultimately, you should make sure to speak to a real estate lawyer to discover your potential options. An attorney with experience handling real estate matters can help you to develop a plan that protects your legal and financial interests, while helping you to avoid potential pitfalls that may arise during the process.

 

    The law office of Georgaklis & Mallas PLLC is experienced in various areas of real estate-related transactions. The firm’s skilled attorneys handle both commercial and residential transactions on behalf of lending institutions, real estate investment and management companies, business and individual clients. Call (718) 238-2400 for more information or to schedule a consultation.

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