They think they're saving but they're actually getting in worse shape because the alternative would be to pay down that credit card
debt at a high interest rate.
If interest rate is such an important consideration when paying off debt, then why did you borrow
money at a high interest rate in the first place?
In reality, the requirement was really a nod to financial institutions to provide protection when they extend
credit at higher interest rates to those who may not be sound credit risks.
However, to make maximum use of that equity and those low refinance rates, homeowners should consider refinancing other debts as well, since these are
typically at higher interest rates.
At the above poster, it definitely makes sense to pay off certain debts before investing especially if they are
at high interest rates because it's a guaranteed return.
However, some companies may offer zero
points at a higher interest rate, which may significantly reduce your initial costs, although your payments may be somewhat higher.
A final reason to consider refinancing is if you are in need cash that otherwise would require you to take on debt
at a higher interest rate then what is available.
If the payments are too high, you can always achieve similar results,
although at a higher interest rate, by making extra payments on your principal when you have funds available.
Your cash withdrawal may also be
charged at a higher interest rate than regular credit card purchases and if you do it regularly, your credit rating might be affected.
In addition, if you bought your
home at a higher interest rate and have not yet considered refinancing, you may not be getting the best deal available.