4 Myths About Refinancing

By Ashley Tate

Record low interest rates over the last few years brought many homeowners to the refinancing table looking to lower their mortgage payments, and with talk that the Federal Reserve might be considering raising rates by the end of the year, consumers who haven’t taken advantage of the environment might want to act quickly.

Before you do, however, be sure to understand the process fully and the long-term financial impact of refinancing your mortgage. Here, the biggest refinance myths are debunked.

• 1Myth: Your Housing Costs will be Reduced

  Undeniably, paying a lower interest rate on your mortgage will reduce your monthly housing outlay—saving you cash in the short term. But if you’re not careful, refinancing could end up costing you more money over the lifespan of your loan.How so?

  Let’s say that you have a mortgage that has still has 15 years’ worth of payments remaining. If you refinance to a loan with a longer term—such as a 30-year loan—you will be paying 15 years’ worth of additional interest payments since you increased the length of your mortgage.

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