Need cash? Paying too much in interest charges? Worried about your growing debt? Mortgage refinancing could be the answer to your financial problems.
As all homeowners know, a mortgage is no more than a long term loan that is repaid over an extended period of time. Mortgages may be paid on a monthly, bi-weekly or weekly basis. With accelerated weekly plans, the mortgage is paid off in less time.
The interest rate is probably the most important factor in choosing a mortgage. It's important to shop for the lowest interest rate, as a lower rate results in lower monthly payments. If you've already locked into a mortgage with a high rate, you can refinance to take advantage of today's lower interest rates, and decrease your monthly payments.
Mortgages are available in fixed and floating terms. In a fixed rate mortgage, the borrower is locked in at a set rate for the duration of the mortgage term. A floating mortgage means that the borrower will pay more or less each month, depending on the current interest rates. Both types of plans have their pros and cons, and the type of mortgage you choose has a lot to do with your present situation. Mortgage refinancing is a good tool to use when homeowners wish to switch from a higher adjustable plan to a lower fixed rate mortgage.
In our prevailing market, mortgage rates will change on a regular basis. If you have already committed to a loan at a higher rate than today's interest rate, you might want to consider mortgage refinancing. When you refinance your mortgage, the full payment of your current agreement will be entered into a new loan at today's interest rate. This can be a wise move when rates drop dramatically, by two points or more. Watch the prevailing interest rates and compare them to what you're currently paying.
There are several factors to consider before moving to refinance your mortgage. Your remaining term is one important consideration. If you have just a few years to pay off the loan, then it wouldn't make sense to refinance and commit to another extended payment period. Various costs also come into play. Prepayment fees for your current mortgage, closing costs of the new agreement and other borrowing fees may be payable. Some lenders will charge a fee for closing a mortgage early, so ask questions and read the fine print before you make your decision.
Refinancing your mortgage can also bring extra cash when you need it. If you have built a significant amount of home equity, you can use mortgage refinancing to obtain a home equity loan. In this case, you can use your home equity to generate cash. The proceeds from mortgage refinance can be used for various purposes, like debt consolidation, home improvements, or as a college fund for your children. Many people wisely use mortgage refinancing to consolidate their debts. Choosing one monthly payment over many bills is not only easier, but it saves you a lot of money by avoiding higher interest payments from credit cards and private lenders. Your pocketbook, and your credit rating, will look a lot healthier.
If high interest rates and a stack of bills are straining your budget, consider refinancing your mortgage. You'll save money by paying less interest. Talk to your bank or financial advisor to determine the option that's best for you.
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