| There are a variety of reasons why someone would | | | | over a period of 30 years, or whatever your |
| want to refinance their mortgage. To understand the | | | | mortgage terms are. If you go back to spending the |
| benefits, it helps to understand exactly what | | | | way you were previously when you acquired this debt, |
| refinancing a mortgage involves. When you refinance | | | | then you will end up in a vicious circle. It only makes |
| a mortgage, you are basically buying your home again. | | | | sense to consolidate your bills into a mortgage loan if |
| The benefit, of course, is that you are buying the home | | | | you are serious about reducing spending and |
| from yourself. The asking price? The amount left on | | | | preventing yourself from getting into the same financial |
| the loan. So, if you have lived in your home for several | | | | situation again. |
| years, and have a good deal of equity in your home, | | | | Drawbacks of Refinancing a Mortgage |
| you can refinance the balance of your mortgage. | | | | Refinancing a mortgage does not always make sense. |
| Typically, people refinance when mortgage rates have | | | | While it can be an excellent way to save money on |
| lowered. The benefit then, is that by financing less | | | | your mortgage, or reduce your monthly expenses, for |
| money, and financing it at a lower rate, you can either | | | | some people it does not make sense. Typically people |
| shorten the term of your mortgage, or you can lower | | | | look at refinancing their mortgage when interest rates |
| your monthly mortgage payment. | | | | drop one to two percent. This is not, however, the only |
| There are other reasons that people refinance their | | | | indicator that refinancing is a good choice. |
| mortgage as well. If you need a substantial amount of | | | | There are costs associated with refinancing. As stated |
| money, refinancing is a good way to come up with the | | | | earlier, refinancing is essentially re-buying your home. |
| cash. In what is known as a cash out refinance, it is | | | | This means that you will once again be subject to |
| possible to refinance your home, using the appraised | | | | closing costs. Your home will be appraised, the title will |
| value of your home as the loan amount (or a | | | | be checked, and the bank will, of course, have their |
| percentage of the value, typically around 80%). The | | | | fees. If you plan on staying in your home for at least |
| difference between the amount of loan that you | | | | five more years after the refinance, then it makes |
| qualify for, and the amount you owe on the home, is | | | | sense to consider refinancing your mortgage when |
| paid as cash. This is an excellent way to come up with | | | | rates drop a percent or two. If you believe that you will |
| money for college, home repairs, or other big ticket | | | | move before five years, you will probably not save |
| items. Because homes often appreciate in value after | | | | any money by refinancing. |
| purchase, it is possible to borrow a substantial amount | | | | One way to save money on refinancing expenses is |
| of money if you have lived in your home for five or | | | | to stay with the same lender that currently holds your |
| more years. Of course, the more equity that you have | | | | mortgage. When you stay with the same lender, you |
| in your home, the more cash you can receive. It is | | | | may be able to negotiate reduced closing costs, or a |
| important to remember, however, that you will be | | | | reduced mortgage rate without paying points. If you |
| making mortgage payments on this new loan amount, | | | | are interested in exploring a mortgage refinance, and |
| whatever the amount may be. | | | | you have been basically happy with your lender over |
| Some people choose to refinance a mortgage in order | | | | the period of time you have had your mortgage, it |
| to consolidate their debts. If you have a substantial | | | | makes sense to start there in the search for |
| amount of credit card debt or medical expenses, | | | | refinancing options. If you find lower interest rates or |
| refinancing can be an excellent way to pay these | | | | low closing cost loans at another institution, first ask |
| debts off over an extended period of time. The | | | | your current company if they can match these deals. |
| process is similar to a cash out refinance, however, | | | | The mortgage market is very competitive, and, if you |
| you will pay off your creditors instead of having extra | | | | have a history of prompt payments, and have a |
| cash in your account. If you choose this type of | | | | substantial amount of equity in your home, it is very |
| refinance, it is important to remember that you are not | | | | likely that the mortgage company that holds your loan |
| debt-free. The bills are rolled into your mortgage, so | | | | will be willing to work with you. |
| you will be paying the credit card or other debt off | | | | |