Consider the Drawbacks of Mortgage Refinancing

Robert Lattas, a Chicago real estate attorney, has more than 10 years’ experience representing real estate developers and homebuyers in property transactions. He was featured as one of Chicago’s premier real estate attorneys in a 2008 publication of Real Estate Executive. Due to Mr. Lattas’ reputation for providing a high level of service, his business has grown and his practice currently includes five additional attorneys.

Now that mortgage rates have dropped to historic lows, many homeowners are considering refinancing their homes at a lower interest rate. Although a properly structured deal can save owners money over the life of the loan, there are many points to consider before seeking to refinance.

First, credit requirements remain stringent, so some homebuyers who previously qualified may find their applications rejected in the tighter credit market. Others may be approved for a loan, only to find that their homes have lost value and now do not appraise at the minimum threshold needed to qualify for a refinance. If homeowners plan to sell their home within a few years, the cost of a refinance may outweigh the savings. Another factor to consider is that refinancing often extends the mortgage repayment period. For example, someone who intended to have his or her mortgage paid off by age 60 may now have to make payments until age 70.