How to Refinance Mortgage
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by: marciafreeman
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Refinancing a mortgage can be financially beneficial if you understand how and when to do it. Given the current economic downturn and the crises in the real estate market, many homeowners are unsure if they should refinance. Mortgage payments are becoming more difficult to pay for some who have experienced job loss or a significant decrease in their investment portfolios. A lot of consumers who bought their properties when real estate was at the peak are left holding the bag of decreased values now. Those who have adjustable rate mortgages are experiencing significant increases in their monthly payments, as their rates reset. You only have to do a brief search on the web to see the many advertisements for refinance mortgage information and help lines. Deciding what is best for your own budget can be a bit daunting.
Refinancing a mortgage is a very personal decision and requires that you know your financial plan and budget. Reducing monthly payments is the main reason most people refinance. Mortgage refinancing can be a financial win if the savings makes sense with the length of time you plan to own the house. Your first step is to figure out how much you would save each month under the new interest rate. Second, estimate the cost of the appraisal, lawyer fees, documentation preparation and filing fees, charges from the new and old lenders, and any other refinancing costs. Third, divide the total cost of the refinancing by the estimated monthly savings. This will tell you how many months it will take you to recoup the cost of the refinancing, referred to as the "break even" point of the refinance. Mortgage refinancing would not make sense, if you plan to sell the house before or on the break even point of the refinance. Mortgage holders whose adjustable rate mortgage will reset soon, may choose to refinance with a fixed rate mortgage, regardless of the break even point. Obtaining a steady fixed rate mortgage in the current rocky economy often outweighs the costs of a refinance. Mortgage holders can also consolidate a higher interest loan or credit card debt with their refinance. Mortgage refinancing with a low fixed rate will usually tender lower interest rates than those of credit cards.
When deciding whether to refinance, mortgage holders should have a solid understanding of their current economic circumstances and monthly budget. Compare the costs and benefits of the refinance with the current monthly payments and how long you plan to own the property. Make sure you are clear on the interest rates, terms and conditions of a new mortgage before you sign those papers.
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Learn more about refinance, read www.getsmart.com/refinance.
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