Most people just think about their mortgage when they hear the word “Refinance”.  Refinancing your mortgage could be a good idea, but several factors should be looked at.  Although the interest rate being charged is certainly one of the primary factors, you must also consider whether there are pre-payment penalties on the existing mortgage and whether you expect to actually keep this new mortgage long enough to make back the closing costs involved in obtaining the new mortgage.  It’s important to do the math before you decide.

Refinancing should also be considered for your Car Loan(s), Credit Card Debt and even your Student Loan(s).

Normally, it is better to pay off your car loan as quickly as possible since the longer the loan the more finance charges you will incur and the less the car will be worth.  However, it might be wiser to lower your monthly payments, by extending the length of the loan, if you dedicate yourself to paying off high interest rate debts (credit cards) first.  Even if you obtained the car loan at the dealership (usually not the best rate), you should shop around before or after your purchase (again make sure there are no pre-payment penalties).  There are many websites like Bankrate.com and CreditKarma.com that can facilitate the search for a better rate.

The elimination of your Credit Card Debt should be your first priority.  My rule of thumb, if I would not pay cash for it right now, then I don’t need it and therefore should not purchase it at all.  Certainly, if I can’t pay-off the complete balance within the next 2 to 3 months I will not purchase any non-essential (emergency) items.  Gifts are NOT essential items!  Now getting off my high horse, here is some advice.  Transfer your balance to a 0% or low interest rate credit card.  But you MUST be disciplined.  This lower interest rate usually only apply to the balance transferred, for a limited time, and not to new purchases.  So STOP using your credit cards.

If your Student Loan is at a low interest rate then do nothing, but they are a loan none the less and should be eliminated as soon as possible.  Consolidation might make them more manageable but again DO THE MATH.

In order to avoid our firm, PLEASE, PLEASE, live within your means.  This is easier said than done.  If you find yourself already in too deep and wish to discuss solutions, including bankruptcy, call us for a free consultation:  Freire & Gonzalez, P. A.  (305) 826-1774.  We are here to help you, not to judge you.


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