Mortgage Refinancing Information
Mortgage refinancing can be a wise decision. Refinancing means taking out a new mortgage loan, to pay off the original mortgage. Homeowners do this for several reasons. One reason is that they want to change the terms of their mortgage. Perhaps, your current loan is an adjustable rate mortgage (ARM), meaning the interest rate varies based on market conditions. In some cases, this can cause your rate and payments to rise dramatically, uncomfortably stretching your ability to repay the loan. By mortgage refinancing into a fixed rate loan, you can lock in an interest rate that will never change during the life of the mortgage. This will create a monthly payment amount that is not only predictable, but hopefully more affordable as well.
Another reason you might consider mortgage refinancing is to change the length of your loan. Assuming you can make the higher monthly payments, refinancing into a shorter term, like a 15-year mortgage, could end up saving you thousands of dollars in interest over the duration of your loan.
You could also refinance in order to take advantage of your home's equity. By mortgage refinancing with a loan large enough to both pay off the original mortgage and pull cash out to use for other projects, like home remodels, college tuition, or new business ventures.
However, there are a few things to consider before mortgage refinancing. There will be closing costs and fees associated with the new loan, and these fees can add up to a couple thousand dollars. In addition, you may have to pay for a current appraisal of your house, and other necessary requirements.
If you are unhappy with the terms and conditions of your existing loan, mortgage refinancing may be the right solution for your home loan needs.