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Mortgage Refinancing Tips

Mortgage refinancing is the fact of taking out a new mortgage loan  against the same assets but under different terms. The refinancing helps you to pay off the original loan, and you are left with a new, different loan. There are many potential benefits to home refinance. You could lower your monthly mortgage payment, and have extra cash. Deepening on the terms, the refinancing may also help you decrease the length of your loan. However, it is important that you do your homework first before refinancing your mortgage to make sure that this is the right option for you. Even though it sounds like good, it can be a bit tricky.


Refinancing your mortgage requires a bit of math to determine if it will be worth it. Home mortgage refinancing is subject to all the same kinds of fees and closing costs as regular first time loans. Keep in mind that in the long run, exchanging an adjustable rate for a lower fixed rate is usually a good idea regardless of the fees. Beware in a depressed economy that the value of your home may have decreased. In this case, a refinance may require you to get private mortgage insurance which might not give you any benefit, or even make your monthly payment increase. If you already pay mortgage insurance, a refinance might allow you to get rid of private mortgage insurance since the equity in your home has increased.     


If you need some extra cash for remodeling or improvements, you may want to consider cash-out refinancing. In cash-out refinancing, you apply for an amount greater than your original principal. Then you take the extra money for whatever purpose you want. You can decrease the length of your loan with a home refinance in two ways. You can refinance with a shorter term, or you can continue to pay the same monthly amount, but be paying more toward principle due to the lower interest rate of your refinance. Another benefit of refinancing is trading an adjustable rate for a fixed one. With a fixed rate you remove yourself from the upswings of the high end of adjustable rates.    


A home is one of the largest assets you can own. It is probably also one of the biggest payments you will have to make on a monthly basis. Luckily, there is mobility in big assets. You can use them to your benefit. Refinancing gives you the opportunity to make use of the equity in your home. All those payments you have been making are not really disappearing into a black hole. They are adding to your financial plasticity.     


As long as you have carefully considered and done your math, a refinance is usually a good thing. Lower interest makes your monthly payments lower to. It can also mean that your loan is paid off sooner. Maybe you are ready to get rid of some of the less than wonderful clauses in your mortgage. Your credit may be better, or your employment steadier. All of these things contribute to making a refinance of your home mortgage an exciting thing for your financial freedom.    

  10 Steps to Home Ownership:

Step 1: Are You Ready?

Step 2: Hire a Realtor

Step 3: Get Loan Pre-approval

Step 4: Search for Homes

Step 5: Choose a Home

Step 6: Obtain a mortgage

Step 7: Make an Offer

Step 8: Insure Your Home

Step 9: Close the Deal

Step 10: Avoid Foreclosure


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