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Viewing Mortgage Refinancing: How it Can Help YouMortgage Refinancing: How it Can Help You
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With lower rates on 15- and 30-year fixed rate mortgages by about 1/2%, many families have been taking advantage of rate refinancing. When compounded, you can be looking at a saving of several thousand dollars or several tens of thousands of dollars. By Robert Bell When people talk about refinancing their mortgage, they are usually talking about swapping their old high-interest-rate mortgage with a new mortgage at a lower interest rate. With lower rates on 15- and 30-year fixed rate mortgages by about 1/2%, many families have been taking advantage of rate refinancing. One-half percent, or 50 basis points (.50), may not sound too significant, but when compounded out over a year, or many years for that matter, you can be looking at a saving of several thousand dollars or several tens of thousands of dollars. Therefore, you many want to inquire with your loan holder about refinancing if current rates are lower than the rate that is on your loan documentation. Refinancing can also be used to do what is known as 'cash out refinancing'. With this type of financial transaction, you need to have access to equity in your home. As an example, if you owe $100,000 on a $300,000 mortgage, you have $200,000 of equity. You can take out $200,000, pay off the remaining $100,000, and use the remaining money for whatever you like, such as home repairs or additions. Whether or not you'll be able to take out a full $200,000 depends on the institution with which you do business. In some instances, you may be able to eliminate your private mortgage insurance premiums by refinancing. If, when you took out a loan for your home, you were not able to come up with a 20% down payment, you could currently be paying private mortgage insurance (PMI). However, if the equity in your home is now more than 20%, you should ask your loan holder if the PMI would be eliminated on refinancing. People also refinance to get out of an adjustable rate mortgage (ARM) and into a fixed rate mortgage. Oftentimes one opts for an ARM when rates are low and look good, but the future of rates is uncertain. Now, that fixed rates are relatively low, it may be advantageous to switch to a fixed rate mortgage if you want to know exactly what you will need to pay each month for the life of your loan. One can also attempt to refinance the length of a loan to save money on interest payments in the long term. If a family has a 40-year mortgage, and their incomes have risen in recent years, it may be beneficial to refinance to a 30-year mortgage to pay less interest over the life of the loan. Another very interesting way to use a home equity loan is to consolidate credit card debt and make credit card interest an income tax deduction. You can potentially save yourself headaches if you use your home equity to help alleviate the pain caused by credit cards. However, you should consult a financial professional to see if this is a reality for your situation. About the Author: To get a mortgage quote for a possible mortgage refinance, visit this loans site that helps people understand loans. Article Source: 1st Rate Articles - http://1stRateArticles.com |
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