Refinancing a home mortgage is a very serious financial decision that should not be done without doing the proper research. No matter what, your number 1 goal over all should be to pay off your home. A home is most likely the most expensive and valuable thing you will ever own. A mortgage refinance can help you own your home faster or cheaper due to better interest rates, terms or conditions. The best reason to refinance a home is to get better rates or to shorten the length of the loan. These are not the only reasons just the best ones. As an example say you pay 10% interest on your current home mortgage and have 15 years left of payments and then refinance into a 7% rate with the same 15 years left to pay. You will be saving 3% every month on the mortgage payment while still owning your home in the same amount of time. You could also shorten the length of the loan which builds equity in your home even faster. Shortening the loan length may mean higher monthly payments but a big savings on overall interest payments. These are both examples of ways to reach the ultimate goal of outright home ownership. All kind of different situations exist which make a homeowner consider refinancing their home loans. Generally, if you are able to refinance into a loan which has a interest rate of 1% or more (The more the better) you could be in line for savings. This should be just enough to cover closing costs and lower your payments every single month while owning your home in the same amount of time. Do not forget to take any closing fees or costs that may be associated with mortgage refinancing. Sometimes you may see no cost or low cost closing fees but you should be aware of those. Often the lender makes up for the low or no cost fees by increasing the interest rate or somehow effecting the terms or conditions of the loan. Try to pay any closing fees up front as opposed to adding them to the total amount of the loan. This way you avoid paying unnecessary interest on these fees which could amount to a few thousand dollars. For the most part homeowners report “breaking even” from mortgage refinancing within 3 years from the day of the closing. This takes into account any and all closing costs and fees. You can check online mortgage calculators like the one on my site for a good idea of the potential savings you can get by refinancing a home mortgage.

a mortgage just to get extra cash is not a good idea. Putting your home at risk is dangerous and should not be done without extreme research and knowledge on the subject. Although, using the money from a cash out refinance to do home repairs or home improvements which will add to the total value of your home may be a good use of the money. A cash out refinance could also be used if you know you will be leaving the house in a few years and want to use the money until you sell your home.

-M Petrone

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