When home mortgage rates fall, homeowners inevitably rush to refinance their mortgages, usually without considering whether refinancing a home mortgage is a good idea or even if it makes financial sense. Unfortunately though, some homeowners can be lured by the lower home mortgage interest rates; however, mortgage rates themselves are only a small portion of the big picture.
There are homeowners who are serial refinancers, I like to call them, who take out new mortgage loans every time home mortgage rates drop. I knew a Doctor who refinanced his home seven times in the past nine years.. This person should have been smarter than that because every time they refinanced, they are adding more principal to his loan as well as extend the length of it.
So, What is a mortgage refinance?
A refinance loan is a new loan taken out by a borrower to pay off the original loan or, in the case of serial refinancers, the loan pays off the last loan that was refinanced. Usually the loan that is is in first position; although, it is also possible to refinance home equity loans as well.
Types of Refinance Mortgage Loans
Do not think that because you have a fixed rate mortgage that you can't take out different types of mortgage loans when you refinance. However, before considering switching out a fixed rate mortgage for different loan type,, make sure you fully understand all the terms and conditions of the new loan. Here are some of the most common types of home mortgages you may want to consider:
FHA Loans
Reverse Mortgages
Option ARM Mortgages
Adjustable Rate Mortgages
Fixed Rate Mortgages

Benefits of Refinancing
Lower monthly payments. If you stay in the home long enough to break even with the refinance costs, a lower interest rate and payment will result in a bigger monthly cash flow.
Shortening the period of amortization. If your can get a lower interest rate that is substantially lower than your previous rate, you might want to consider shortening the term of your loan in exchange for a nominally higher mortgage payment. Before doing this, figure out if you could invest that extra cash into elsewhere to get a better rate of return.
Cash in hand. Many obtain cash to invest at a higher rate of return than the new interest rate, or use the equity they have built up in their home to get cash back and refinance for more than they owe now while pocketing the difference.
Whatever you choose to do make sure to practice patience and do a bit of research prior to taking the dive into refinancing your home mortgage. Make sure you refinance the right way and save hundreds monthly.

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