Refinance Mortgage-Factors to Consider

Mortgage refinance essentially involves securing a new loan to repay an existing mortgage loan. This is usually done when it is possible to secure the second loan under more favorable terms than the original mortgage loan. These more favorable terms can lead to a host of benefits for the property owner which may include lower monthly payments, the ability to utilize the existing equity in the home and the ability to repay more of the principle loan and less in interest each month.

Is Now the Right Time for Refinance Mortgage?

Considering a refinance mortgage may be a good idea in a number of different scenarios. Some of the factors or changes which might make it a good idea to consider refinancing your mortgage are:

• Improved credit scores
• Lower interest rates
• The need to use the existing equity in the home

Property owners who have credit scores which are higher than they were when the original loan was acquired might want to consider the option of refinancing their mortgage. This is significant because lenders typically reserve their most favorable loan terms for those with high credit scores. Lenders consider those with high credit scores to be less of a risk and often reward these homeowners with better interest rates.

Anytime that interest rates are lowered it is wise to consider the option of refinancing your mortgage. Lower interest rates can lead to a significant cost savings over the course of the loan making it certainly worthwhile to investigate this option. Care should be taken to ensure the new interest rate will be low enough to offset the closing costs for the new loan. There are mortgage refinance calculators readily available on the Internet to help you determine if refinancing will be financially beneficial. As long as the total savings resulting from the refinanced mortgage exceeds the closing costs and other fees associated with securing the loan it is advantageous to pursue the option of mortgage refinancing.

Finally refinancing your mortgage may be a good idea when the homeowner wants to take the opportunity to utilize the existing equity in their home. There are cash out options for mortgage refinancing options which enable the homeowner to utilize the equity for any purpose they wish. This may include home improvements, education or even starting a business. One way to do this is through a home equity line of credit where funds are made available to the homeowner but not disbursed until requested. There is typically a borrow period where the homeowner has the ability to draw upon these available funds.