What You Should Know About Mortgage Refinancing

We are a culture of buy now and pay later. What we see we want and what we want we buy even if we don't have the money. Credit is easy to get and easy to spend. When you don't actually hand someone money, the purchase seems free. Of course, we all know intellectually that the purchases are not free, but we will worry about the bills later.

We want to play with our latest toy. Unfortunately, one day the piper comes, and he wants to get paid. If we can no longer pay our bills or the interest rates are disastrous, we home owners look to our homes to get us out of debt. Three words - Home Mortgage Refinancing. Our homes become our way out of financial ruin.

Mortgage refinancing is something that most every homeowner will do at least once during the term of their original mortgage. There are many reasons why homeowners choose to refinance. Let's take a look at why you may want to refinance your mortgage and the potential benefits of doing so.

One reason homeowners may refinance is to obtain more attractive terms on their fixed rate mortgage. Perhaps you purchased your home with a fixed rate mortgage that was the best available at the time. However, because interest rates rise and fall, you might want to refinance your fixed rate mortgage to take advantage of a lower fixed rate than the one you have now. Doing this can save you a great deal of money in the long run.

Another reason that homeowners choose to refinance is to lower their monthly payments. Let's say you purchased a $200,000 home and your monthly payments are $1800. By refinancing, you can lower your monthly payments by several hundred dollars, giving you extra money each month for other things. How much lower your payments will be will depend on the rate you refinance at, of course, and the figures stated above are simply theoretical.

Still another function of mortgage refinancing is to switch the type of mortgage you have. Some people begin with an adjustable rate mortgage because the starting rates are low. However, adjustable rate mortgages can fluctuate. This is why many people decide to refinance to a fixed rate mortgage. Or, maybe you have a fixed rate mortgage and desire a reduction in your monthly payments. Switching to an ARM or adjustable rate mortgage can be just the thing to lower those payments, as long as you understand that your rates are subject to fluctuations.

Some people refinance to obtain large sums of money for expenses like home improvement or college tuition. This procedure is referred to as cash-out refinancing and gives you access to the money you need quickly. One reason to do this as opposed to getting a personal loan or credit card is that you're likely to receive better rates. Alternatives to cash-out refinancing include getting a home equity loan or line of credit.

Want to learn more about mortgage refinancing and obtain a variety of quotes from competing lenders? Then check out Lending Tree (http://www.lendingtree.com.) After submitting a simple application, you'll be presented with the top four offers chosen from hundreds of different lenders. It's an easy way to compare rates and find the best offer for your needs!

Copyright 2006 Jim Sterling - All Rights Reserved

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