There are several reasons that people may look to refinance
home loans. Probably the most common is
to take advantage of lowered interest rates.
Some of the other reasons people refinance home loans is to pay off high
priced credit cards, make home improvements, and rebuild credit rating that has
taken a turn for the worse.
What is involved when borrowers look to refinance home
loans? When you refinance you normally
just pay off the old mortgage and sign a new mortgage. Now this will also mean most of the same
costs you had when you signed the original mortgage. Depending upon your State or the terms of
your mortgage you may pay a penalty for paying the note off early.
Individuals who refinance home loans look at several things
before doing so. Look for a company that
may be willing to waive the normal fees.
These include such things as an application fee, legal fees and
appraisal fees. This are all normally
associated with closing fees on a new mortgage.
This could save thousands of dollars.
It would give you a higher monthly payment but this could be still acceptable
with a small rate decrease.
How long do you plan on staying in your home? If the answer is just a few months the
monthly savings may not have time to catch up to the costs involved if you were
not able to secure a loan from a company who will refinance home loans but will
not waive fees involved. What are the
new rates? As a rule try and find a rate
that is minimum 2 points below your current mortgage rate.
Some who refinance home loans do so with the intention of
building equity in their home faster.
Now with this type of loan your month cost will be higher even with a
lower rate. The benefit is you build
equity faster and pay less interest over the length of the mortgage. If you wanted to refinance a 30 year mortgage
to a 15 but the cost was to high you may want to check about a 20 year mortgage
to still be able to take advantage of the lower rates.
The last important point to remember with companies who
refinance home loans. Try and get a
guarantee on the rate so that it is locked in during closing. This will keep the rate the same even if it
should go up prior to your closing. You
could even try and see if they will agree to a rate decrease if that should
occur before closing. The refinance of
home loans is competitive enough that if a company will not do either of those
option. You may want to check with
another company. The ultimate goal is to
reduce your payments or to increase the equity of your home in a shorter time.
