Refinancing a mortgage is a good way to take advantage of low interest rates, which will save you money. Specifically it is the process of taking out a new
mortgage, and using the money to close out or pay off a current mortgage. If you
refinance with a lower interest rate you'll reduce your monthly mortgage payment
even if your new mortgage is for the same amount as your current mortgage.
Obtaining a new mortgage involves costs of its own. If you choose to refinance. you need to weigh the monthly saving over your mortgage term (usually 30 years) over the cash you will most likely receive from refinancing.

Traditionally, the rule-of-thumb that's cited is that the
interest rate for your new mortgage should be about 2%-3% (percentage) points lower than your current mortgage. Lately there are a lot of no cost, or low cost refinancing options that may work for your personal situation. It is likely worth your while to refinance and obtain a refinancing plan that will save you money monthly.
Refinancing is a great way to get some cash out to do a complete renovation to your home. Folks will get refinancing right before they put the house up on sale on the market. One trend that is catching on is that folks will hire a home stager to increase the curb appeal of their home. A home stager will suggest tips on how to best fluff your house to get the best selling price. Fluff enough and potential home buyers will imagine your house looks better than it really is. I have heard of real life stories where this bachelor hired a home stager and he got an extra $50 000 for the sale of his condo downtown.

Terms You Will Want To Know

Reasons To Refinance

1. Save money on interest rates. If you obtained your

current mortgage when interest rates were considerably higher than they are

now, then refinancing makes sense. With a lower interest rate your monthly

mortgage payment is reduced.

2. Convert an adjustable-rate mortgage (ARM) to a

fixed-rate mortgage. You have an ARM and your nerves can't take it any more.

If interest rates are low, you may decide to choose the predictable monthly

payments of a fixed-rate mortgage.

3. Convert an adjustable-rate mortgage (ARM) to an ARM

with more desirable features or lower rates. You want an adjustable-rate

mortgage that offers better protection than your current loan and offers

significant savings. Even though the interest rates on ARMs fluctuate

with prevailing market rates, you may have one that's tagged to higher

indices-and carries a higher interest rate-than other ARMs currently


4. Build up equity faster.
If your financial resources

have improved since you obtained your mortgage, you may want to convert to a

mortgage with a shorter term-perhaps a 15-year mortgage instead of a 30-year


5. Convert equity to cash.
If you've held your mortgage

for a long time, you will have substantially
reduced the outstanding

principal on your loan. This means you'll be able
to finance a considerably

larger amount than you owe on your current mortgage.

Dollars & Sense

Home Equity Loan or (second Mortgage)

* fixed rate, generally tied to long-term interest rates.
* fixed repayment schedule, usually 10, 15 or 20 years
* higher rates than(heloc), in flexible repayment periods, entry fees
* lump sum of cash for one time need such as home remodeling, debt consolidation, or cash out

Home equity line of credit (HELOC)

* Monthly Variable rate, usually tied to the prime rate
* Payments to immediately; borrowing can ast five to 10 years Followed by repayment
* Interest rates can climb steeply within a few months; no cap adjustments
* Flexible or emergency borrowing to finance reoccurring expenses for education or health care

Glossary in terms:

What is(ARM) Adjustable rate mortgage?

The interest rate adjusts monthly or every 3, 6,Or 12 months over a 30 year
term. The disadvantage here is thatYou need to watch out for interest rates
rising substantially an unexpectedly depending on the market
conditions. This type of rate Is suitable for homebuyers that would

like to live in their home for a very short period of time, and can only pay
the lowest possible Monthly payments. Don't forget if you are a new home buyer to learn how much you can save in interest by credit repair calculator and improve your credit score. As well, you will want to run a free credit report before getting quotes on home loans.

Source:Consumer Reports - May 2005


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