Refinancing your Mortgage Loan

A mortgage refinance refers to applying for another mortgage to replace an existing mortgage on the property. There are many reasons why borrowers decide to refinance their homes:

*  Reduce interest costs with a lower interest rate
*  Reducing the risk from an adjustable-rate by switching to a fixed-rate loan
*  Liquidating equity into cash (Cash-Out Refinance)
*  Increasing the loan term and reducing Monthly payments
*  Decreasing the loan term
*  To get rid of Mortgage Insurance
Among some of them...


A mortgage refinance has the same costs as a mortgage, such as loan application fees, loan origination fees and appraisal fees that must be taken into consideration. Depending on the equity and Loan to value homeowners have the option to pay these costs upfront, or finance them, in the long run a refinance with a lower interest rate is likely to save more money. Overall, when refinancing for a lower interest rate, the main deciding factor is if savings on interest will be greater than the total refinance costs and prepayment penalties if needed.


Some loans, especially fixed-rate mortgages, have a prepayment penalty to discourage borrowers from terminating their mortgage early by paying off the remainder of the loan early.  Homeowners will need to calculate the total cost of refinancing their home to decide if it is the best option. Many financial advisors suggest that homeowners look for at least a two-percentage point reduction in their mortgage prior to refinancing. Homeowners can also use online mortgage calculators to get a better estimate of how much they can save by refinancing. However, online mortgage calculators usually do not take into account all the costs incurred with a mortgage refinance. 


http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx

Homeowners who plan on a cash-out mortgage refinance to liquidate equity for home remodeling, large expenses, credit-card debt elimination, debt consolidation, or any major expense might benefit from consulting a financial advisor.  With a cash-out mortgage refinance, homeowners are refinancing their existing mortgage with a higher borrowed amount. This results in a single loan and loan payments that can be stretched over a long term. Homeowners are also advised to see if there are any stipulations or requirements set by their lender prior to refinancing their home. 


For example, the Federal Housing Administration has several requirements for cash-out mortgage refinances on their loans, including loan limits, the amount of equity that can be cashed-out, and qualification and eligibility requirements. Besides a cash-out mortgage refinance, there are also other options available to homeowners looking to free up equity. Homeowners can also take advantage of other mortgage products such as a Home Equity Loan or home equity line of credit (HELOC), which generally have more flexible spending and repayment options.