Friday, June 30, 2006

Refinancing for the Right Reasons

In todays mortgage industry, it's required that you show benefit for the borrower when they want to refinance their current mortgage. This requirement of showing benefit is in place to help borrowers avoid predatory lending practices from some of the more unscrupulous individuals out there.

There are many ways to show benefit. Some common ways are very simple indeed, such as Refinancing for a Lower Interest Rate, or a Shorter Term. Other ways could be to consolidate debt, or get cash out for home improvements. I consider these to be valid reasons for refinancing.

Before I came to be a mortgage planner, I had worked for eight years, extensively in the wedding industry, helping wedding professionals with their internet marketing and business development. While I was doing such work for an online wedding directory & magazine, we had received many inquiries from mortgage brokers requesting to advertise to brides and grooms about refinancing their mortgages to get cash out to have that wedding of their dreams. After proof-reading hundreds of articles, many about being budget conscious and having a frugal wedding within ones means, I had feelings that this was not a smart idea, in general, for most couples. They would be putting themselves in further debt at the onset of their lives together, and the interest paid on such debt would be far more than had they just had a more frugal wedding within their means to begin with.

Now, as a mortgage planner, I posed the question to several online bridal communities and forums. And without a doubt, many of the bride / groom 's that responded said they thought this would be an awful idea and they wouldn't ever think about doing such a thing. Many gave reasons regarding regarding interest paid on debt over the years, preference of having a more frugal wedding, etc...

So I ask the question to you. Are the reasons your thinking about refinancings valid and worthy? You should be educated on the purpose of why you need or want to refinance, and know why the program your getting into is the best for your situation.

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