Is refinancing a Mortgage a good move in Property Development?

HomeReal Estate

  • Author Justin Trapp
  • Published May 13, 2011
  • Word count 526

Many people are considering whether or not to refinance a mortgage as part of their property development plans. This may be done as a way of freeing up equity that can then be reinvested or it may be done in order to lower borrowing costs and make a property that much more profitable. Here is what you need to know about refinancing so that you can decide whether it is a good move for you.

Why do people choose to refinance their mortgages?

There are many reasons why people choose to refinance their mortgages. Usually they do so because mortgage rates are more appealing than the ones they have now. Interest rates may fluctuate quite a bit during the life of a mortgage and if someone signed up at a higher interest rate, they may want to refinance in order to change the amount they are paying.

They may also choose to refinance as a way of removing equity that has built up or to add additional debt onto an existing mortgage. This is often done because a mortgage can have a lower interest rate than other forms of debt may have.

When refinancing may be a good choice

There are different circumstances that may determine whether refinancing is a good move or not. A lower interest rate translates to lower monthly payments. This can mean more profit for you if you are renting out a unit, for example, or it may also mean a lower overall debt load, which can be good for future borrowing requirements. If you are having trouble paying a higher amount reliably than this may make it easier for you to carry your debt and make payments reliably. This can translate into a better credit score and may mean that you can borrow in future at a lower rate than if your credit rating was poor.

If, however, you are borrowing well over the value of a home in order to get rid of other debt this may not be the best move for you to make. In the event that you are forced to let a property go a higher mortgage will usually mean that unless you can get a great price for that property that you will still end up being in debt. In today’s real estate market, this is not a deal breaker but it may be something that you want to consider before making the decision to refinance.

An advisor may be able to help you decide

If you are not sure whether refinancing will be a good move for your property development project you may want to consider speaking with a financial advisor. They will be able to give you an idea of how this will affect your credit rating. Speaking with a real estate expert may also be a good idea as they may have ideas about what the market is like and whether you may be forced to sell your property at a loss. They may also be able to look at mortgage trends and tell you whether or not they think it is a good idea to refinance now or in future.

Justin Trapp is a Licenced Property Broker who writes about topics concerning Property Investment and development in the USA, To find out more about him visit his website [ http://www.florida-property-direct.com](http://www.florida-property-direct.com )

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