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Most borrowers will have no problem seeing the advantages of refinancing a mortgage, but may not be aware that there are disadvantages that can be caused by unscrupulous scammers that will try to take advantage of someone who is desperate to save their home. We’ll examine some of the advantages, then look at the disadvantages so that you can truly evaluate your need to renegotiate the terms of your loan.

If you have had your home for a few years you may have noticed that the value of the home is different than what you paid for the property. If your home has increased in value, you may want to refinance so that you can take advantage of the increase in equity that you have in the home. If you have been paying private mortgage insurance (PMI) because you did not have a high enough equity, you may be able to ask for the requirement for this insurance premium be dropped.

If you have a higher rate of interest than those that are advertised, you may want to take advantage of a refinance that will lower the amount of your monthly payment. If you have an adjustable rate mortgage (ARM) you may be able to get a fixed rate of interest. If you have a 30 year note and you have paid for five years, you may qualify for a 15 year loan that will shave 10 years off your repayment period. All these options can save the homeowner thousands of dollars over the length of the home mortgage.

Some of the disadvantages of refinancing are the chance of a homeowner being scammed. One scam is called the mortgage elimination scam. A company will tell the homeowner that their mortgage payment can be eliminated if they pay a fee to the company for help. You can pay a fee to this company and you will lose your money because the company has no agreement with your lender to negotiate on your behalf for a change in the terms of your mortgage.

Some companies will ask the mortgage holder to pay a fee and the company agrees to give the homeowner a letter of mortgage satisfaction. This is supposed to be a document that proves the mortgage is paid in full and would be filed with the county where the mortgage lien is filed. The fee paid to this type scammer does not pay off the mortgage and if the homeowner does not continue to pay the mortgage, the lender will foreclose on their home. All the homeowner has is an expensive letter that has no benefit to the borrower.

Finally, the last scam we will review is one in which the scammer tells the debtor that it is unlawful for the current mortgage company to demand payment of the note because of the devaluation of the dollar. The scammer will ask the homeowner to sign a contract for the company to negotiate with their mortgage holder and pay a fee for the services. The unsuspecting homeowner will soon find out that the contract they signed gave the scammer claim to their property deed and they have lost not only the home, but the fee paid to the scammer as well.

Be sure to carefully research all your options when you want to refinance your home. If it sounds too good to be true, it probably is. The best option would be to continue the relationship that you have with your current mortgage holder and find out if the lender would be willing to renegotiate the terms of your loan.