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When Mortgage Refinancing is a Good Idea

When Mortgage Refinancing is a Good Idea

This article may be reprinted as long as all the

above links are active and clickable.

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Refinancing a mortgage is simply taking out a new mortgage. It means

paying off one or more old debts by getting a new loan. Sometimes,

refinancing your mortgage can really save you money. You may be able

to pay less interest, lower your monthly payment, or convert from a

30-year loan to a 15-year loan and build your equity faster. But be

sure that refinancing is right for you.

1. Refinancing can be a good idea for you if you:

- want to get out of a high interest rate loan to take advantage

of lower rates. This is a good idea only if you intend to stay in

the house long enough to make the additional fees worthwhile.

- have an adjustable-rate mortgage and want a fixed-rate loan to

have the certainty of knowing exactly what the mortgage payment will

be for the life of the loan.

- want to convert to an adjustable-rate mortgage with a lower

interest rate or more protective features.

- want to build up equity more quickly by converting to a loan

with a shorter term.

- want to draw on the equity built up in your house to get cash

for a major purchase or for your children's education.

2. Some situations where refinancing your mortgage can really save

you money:

- refinancing your higher interest rate unsecured loans with

lower interest rate unsecured loans if the terms of the loans are

comparable and the new rate is lower than the existing rate.

- refinancing your secured debts (such as your mortgage or car

loan) if the new loan is for the same length of time left on your

old loan (or shorter), and the interest rate on the new loan is

substantially lower than the interest rate on your existing loan.

- refinancing your home to pay-off expensive car loans or credit

cards provided you're not in financial difficulty and not at risk of

losing your home.

Mortgage refinancing can be worthwhile, but it does not make good

financial sense for every homeowner. A general role of thumb is that

refinancing becomes worth your while if the current interest rate on

your mortgage is at least 2 percentage points higher than the

prevailing market rate. This figure is generally accepted as the

safe margin when balancing the costs of refinancing a mortgage

against the savings.

Sometimes, refinancing is an appropriate way to resolve financial

problems. In some situations, however, refinancing can make existing

financial problems worse. If you decide that refinancing is not

worth the costs, ask your lender whether you may be able to obtain

all or some of the new terms you want by agreeing to a modification

of your existing loan instead of a refinancing.

Copyright © 2005. Chileshe Mwape writes for the Mortgage Lender

Guide at: http://www.lending-guide.org/ which offers informative

articles about mortgages and loans.

This article may be reprinted as long as all the above links are

active and clickable.This article is free for republishing
Source: http://www.articlealley.com/article_10565_19.html

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