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Mortgage Refinancing Explained

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By : Sonia Smith    99 or more times read
A mortgage refinancing is a similar procedure that you encountered when closing on your first mortgage. It also requires application, title search, credit, new survey, and appraisal and inspection fees. The chance to refinance your mortgage at a lower interest rate is sure to catch your attention. Nonetheless, it may no always be the right choice for you, thus you should be able to determine the right time to refinance your mortgage.

Before you proceed on your mortgage refinancing plans, make sure to determine what you want to accomplish. Don’t forget that refinancing does not pay off your debt but only restructures it usually at a much lower rate of interest and a different loan term compared to your present loan. The most common goal in refinancing is reducing the interest costs. Nonetheless, some homeowners also appreciate the chance to extend the loan back to thirty years and reducing the monthly dues.

Another reason why you should consider refinancing is debt consolidation. If you have a first mortgage and a home equity mortgage at the same time, combining them into one fixed-rate mortgage aids level out the payment over the loan term. Keep in mind that it pays to refinance if you will be able to get an interest rate with at least two percent points lower than what you are presently paying. However, situations vary on a case-to-case basis. There are some lenders who provide reduced fees or no points. It is of vital importance to determine how much you can reduce your monthly payment, how long you plan to live in the house after refinancing it and how much you are going to pay for the costs of refinancing.

Furthermore, you also have to determine the amount you have already initially paid for the property. This could help you figure out where you break even and where you start saving money. The advantages of refinancing your mortgage for several borrowers is it helps in lowering the payments on a monthly basis and makes cash ready for investing or for other expenditures. When considering refinancing, make sure to shop around to find the right lender for you. Keep in mind that some of the advertised rates of lenders are not reliable. Experts say that when mortgage refinancing companies publish their rates, there is more likely that only around ten percent of applicants can avail of it. The low rates of interest advertised are used to entice people, thus refrain from jumping on the refinancing bandwagon right away.

Make sure that you establish the kind of loan you will need. It is important to disclose details to the loan officer for you to get the best rates possible. Discuss with the loan officer how long you can pay off your loan and the amount you exactly need. It would be preferable to inform the loan officer immediately about any information that determines whether you meet the requirements or not. The sooner, the better so you will determine if you are exempted from paying other additional fees. Do not forget to weigh your options well and choose the right one for you.
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