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This is the question many property owners might have when they are thinking about re-financing their house. The fact is that the answer for this question is a rather complicated one and the correct answer is never exactly the same. There are a few normal situations where a house owner might look into the possibility of re-financing. These situations include when rates of interest decrease, when the homeowner's credit rating improves and when the property owner has a major improvement in their finances. While a re-finance might not necessarily be warranted in all of these situations, it is definitely worth looking into.

Drops in interest rates usually send house owners rushing to re-finance. However the property owner should consider the rate drop prior to deciding to re-finance. It is essential to note that a house owner will pay closing costs every time they re-finance. These closing costs can include application fees, origination fees, appraisal charges and a wide variety of other costs and can add up very quickly. Because of this fee, every house owner should very carefully review their finances to figure out whether or not the re-financing will be worth it. Generally the closing costs should not go beyond the overall savings and the time period the house owner is expected to keep the home to recoup these expenses should not be longer than the property owner plans to keep the house.

When the homeowner's credit ratings improve, considering re-financing is warranted. Loan companies are in the business of making money and will probably offer good rates to people with good credit more likely than they are to offer these rates to people with bad credit. Because of this, individuals with bad credit is usually offered terms such as high rates of interest or adjustable rate mortgages. Property owners who are dealing with these situations might look into re-financing as their credit improves. The best thing about credit ratings is errors and blemishes are at some point removed from the record. Therefore, home owners who make a genuine effort to correct their credit by making payments in a timely fashion might find themselves in a position of much better credit down the road.

Homeowners must also think about re-financing when there is a substantial improvement in their finances. This might include a big raise along with the loss of a job or a general change in careers causing a significant decrease of pay. Either way, re-financing can be a worthwhile option. Property owners who are making much more money might think about re-financing to repay their debts. On the other hand, people who are not able to meet their monthly financial obligations might turn to re-financing as a method of extending the debt which will reduce the monthly installments. This could lead to the owner of a house paying more cash over time since they are extending their debt over a longer time period but it might be required when you're in trouble. When this happens a reduced monthly payment will be worth paying over time.