Mortgage Refinancing is a process in which you replace one or more existing loans or debts with a new loan, usually secured by the same assets. The most common type of refinancing is for home mortgages. Before you decide to go ahead and refinance, there are a number of facts you need to consider.
Is Refinancing Right For Me?
In most refinancing situations, the borrower does so mainly to reduce the interest cost and replace it with a new lower rate. Before you jump into refinancing, you must determine whether the new loan option will ultimately save you money.
When you purchased your home, there were a number of factors that determined your total principal amount. Credit rating, down payment and the current interest rates were at the top of that list, but these things change over time. It may now be beneficial to refinance with your higher credit score, increase of cash flow and lower rates set by the Federal Reserve.
Benefits of Refinancing
The main goal of refinancing should be to lower your monthly payment, reduce your payment period and save you money!
You can now easily apply to refinance your home mortgage and fulfill that goal. For example, you have a 30-year mortgage youíve been paying since you bought your first home when you were young, had average credit and the market rates were high. Itís now 10 years later and you are feeling locked in to your loan. You have a stable job, a high credit score and the US is in a rate-cutting period. You now have option to refinance! You can change your payment period to 10, 15, or 20 years, saving you thousands of dollars in interest. Because your refinance rate is lower and on a shorter payment period, you can still have the same monthly payment. This doesnít mean the refinancing was useless. You are now building equity in your home faster as you cut out interest and are paying more on principal.
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