Higher Rate Refinancing May Be Beneficial

More than a third of new applications in the current, struggling mortgage market are refinances. As rates continue to rise, most would think that refinancing just doesn’t add up. But under the right circumstances, refinancing to a higher rate may be a good move. One scenario for refinancing higher is if a person has an old mortgage and little left to pay off, but high interest credit bills or home renovations that are a necessity. In this case, the home’s equity could be refinanced, bills could be consolidated, and monthly overhead would be cut – even with a higher rate.

The other reason to refinance at a higher rate is an adjustable rate mortgage. At the initial stage of an adjustable rate mortgage, the rate and payment are normally very low. After the first adjustment, however, the rate and payment can very drastically. If a loan has a three or five year fixed period, it would make sense to refinance to a higher rate prior to the fixed period expiring.