When someone refinances their mortgage, all that means is getting a new mortgage, typically with better rates or terms, to pay off their old home loan. Typically, a home owner is able to save money by getting lower interest rates, a shorter term, or other special incentives. However, if you are having problems financially, a refinance is usually trouble.
Why wouldn't you want to save money on your monthly home payment? More than likely, a mortgage is the largest expense a person will ever have in their life. This, however, does not mean that you are necessarily trapped in a home loan that was a good deal 15 years ago when you purchased the home, but doesnt compare favorably to current loan terms. You still have the option to do comparison shopping for refinance quotes which may be better than your current rate. You do not even need to use the same lender you currently use.
Try to find a mortgage lender who works with a multitude of big financial houses, he should be able to get you 6-7 quotes from major mortgage lenders he works for. If you don't find anything that perks your interest there, keep going. Don't be afraid to throughly search for a better rate through a lot of lenders if necessary until you find one that fits your needs. Also, a person with bad or less than average credit should use a broker first, they usually have connections with mortgage specialists who deal with sub prime, or low credit, loans.
Often, someone decides to use their equity built up in their home as a way to get out of debt. This is a way to deal with nagging debts you feel you cant get in front of, but it is usually not a good idea. If for whatever reason, you refinance, and due to financial problems are unable to make 1 monthly payment on your house, you are dangerously close to losing your home.
Truly know what you are getting yourself into before considering a putting your home and everything you have in terms of equity vanish for a few dollars savings every month.
A good reason to pursue a refinance is to get out of a higher interest a ARM loan and get into a more stable and, at least these days, some of the lowest interest rates in history. With a fixed rate mortgage your payment will not vary 1 penny no matter what financial happenings are going on in the world.
With a ARM loan, your payment can and will vary based on current markets and the prevalent interest rates.
Make sure to read and reread every single piece of paper you are expected to sign. This way you will not be in for any surprises when your mortgage comes in the mail. If something seems odd, or not correct, ask about it and don't hesitate to back out of the deal anytime you feel something is at less than face value.

-M Petrone


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