Refinancing Your Home Mortgage

Home mortgage refinancing is a popular means for homeowners to save money by receiving lower interest rates and monthly payments. When an individual chooses to refinance, they are essentially obtaining a new loan to pay off an existing home loan. Homeowners are often tempted to refinance every time interest rates drop. They may use a home mortgage refinance to change their adjustable rate into a fixed rate mortgage. Generally, homeowners choose this option to take advantage of low interest rates. Others use refinancing for cash. Despite the purpose, this is a unique process and decision for every homeowner.

Before choosing whether or not to refinance, the consumer should calculate the expenses and determine if they will really benefit from it. At one time, if the new loan's interest rate was not at least 2% lower than that of the original agreement, refinancing wasn't a good idea. However, the changing market has made this standard completely invalid. The individual now has to consider the interest rate, settlement costs, points, closing costs and fees required for home mortgage refinancing. To determine some of the costs, the consumer will have to contact lenders for their exact fees. Starting with the original lender may lead to incentives because they may want to keep the individuals business. Also, consumers should find out if there is enough equity to merit home mortgage refinance. With all the details in hand, the best option for the individual will be much easier to determine.

This financial situation is often a long, involved process. Some would say it is almost as complicated as buying a house all over again. Home mortgage refinance requires a lot of paperwork and a complete evaluation of debt, income and credit history. As a starting point, financial advisors warn against making any large purchases within six months of applying for home mortgage refinancing. Outstanding debts and overdue bills will only hinder the process of getting a better rate through refinancing. If the consumer has ever been delinquent on a loan payment or threatened with foreclosure, refinancing at a lower rate may be especially difficult.

If the consumer decides to pursue home mortgage refinancing, it is vital to do so with caution. Individuals should always work with companies that are known and reputable. Make sure that they are federally insured as well. If someone has never refinanced, talking to someone who has can be very insightful. They may even be able to recommend a good lender.