Why Refinancing Loans is Risky

There are a number of reasons why refinancing mortgage loans can be a risky proposition. Particularly when you refinance your mortgage loan in order to extract your home's equity in cash, you may be taking on more debt that you reasonably can afford, increasing the total amount paid on your mortgage loan through interest and other costs, and putting your ownership of your home at risk.

Taking on Additional Debt

If you refinance your home in order to use its equity for home improvement, debt consolidation, or any other purpose, you are taking on additional debt that is likely to increase your monthly mortgage loan payment. In turn, if the unexpected happens, such as a job loss or medical problems, you may be saddled with a monthly mortgage payment that you are simply unable to afford.

Increasing Your Interest and Costs

Refinancing often comes at a cost, including closing costs and transaction fees. Likewise, if you increase the term of your mortgage loan by refinancing, you will pay often several years more in interest costs, which adds to the overall costs of financing your home.

Risking Foreclosure

Whenever you take on additional debt that is secured by your home, you put your ownership of your home at risk. If you get in a position where you are unable to make your monthly mortgage payments, you risk foreclosure of your mortgage loan. This is particularly the case when you use your home equity as a debt consolidation tool. Whereas failing to make payments on an unsecured personal loan or credit card debt can result in a lawsuit and garnishment of your wages, failing to make your mortgage payments can result in foreclosure and the loss of your home.

Retain an Attorney for Assistance

When you are facing the prospect of refinancing your mortgage loan, you should contact an attorney so as to explore all of the options and risks in doing so. This step will help ensure that you avoid some of the serious risks of refinancing, including the loss of your home.