For the intelligent readers of this blog, this entry is just a rant. I heard a segment on the radio tonight about “Should you Refinance”, and I was pretty appalled at the advice given. The expert on the radio said, “If you are already well into your loan, one drawback is that you’ll reset the clock for 30 years with your new loan…”
Ok, well its true that you generally get 30 more years to repay. But since when is that a drawback? His statement reflects the underlying principle of how Americans view loans – and it is very troubling.
Refinancing shouldn’t be about getting a lower monthly payment unless you simply can’t afford your current loan (should be rare). Refinancing should be about saving money because you are paying less in interest each year and paying more against your principal instead. It’s pretty simple.
Are we so stupid that we think we have to put the dollar amount that is on the payment slip each month? Yeah, I guess we are – welcome to the land of the ‘interest only’ ’30 year loan’.