Devil's advocate: 3 reasons for not refinancing your home

Should we refinance or not? Should we just pay off the mortgage and forget about refinancing? These are questions homeowners ask a lot; particularly when the interest rates are really low. Still, refinancing can be a bad idea and may harm you in the future. If you're thinking of refinancing, you may want to consider the following questions before moving forward.

1. What's your credit situation?

True, there are record low interest rates right now. But, the truth is not everyone can get those low rates. People with excellent credit history and scores, yes. Folks with less than stellar scores, not so much. Therefore, if you're likely going to pay higher interest rates, you may want to reconsider refinancing.

2. How long are you staying?

There are closing costs associated with refinancing. If you're not staying long in your home or intend to put it on the market for sale, you'll find that the closing costs will most likely, be huge. As a result, you'll probably end up losing way more than could have saved. If you aren't leaving, however, and intend to stay there for a reasonable length of time, refinancing is a great idea now.

3. Do you want to use the money to pay off other debts?

When you're in a bind, you're more likely to make financial mistakes. Refinancing just to pay off your debts is not a good idea. What you're basically doing is putting up your home as collateral for the loan. And if you're unable to pay it off, what happens? Your house will most likely get liquidated to repay the debt. This is not a good spot to be in so consider your options. Therefore, if the reason you want to refinance is so you can pay off other debts, think again. It is likely to cost you more in the future than you will save now.

Refinancing is good under the right circumstances. But if it's any of the above mentioned or other situations that has the possibility of leaving you vulnerable and involves the risk of losing your home, please reconsider it. It just may not be the right step for now.