Mortgage rates for the past 30 years have changed a lot with a multitude of new loan options available. For example in the 1980s mortgage rates were around 18% for a typical 30 year fixed rate mortgage. Now though, mortgage rates are at near lows all across the country, typically around 5% or so.

A lot of homeowners who got financed when the mortgage rates were very high and are now looking for a way to refinance and take advantage of the low rates currently available. If this is you, you should know that there are some costs related to refinancing a home mortgage. These costs can include loan origination fees, appraisal fees, and title insurance to name a few. In general to figure out whether you will save when you refinance you can follow the 2% rule. This rule basically states that if you can get a mortgage rate that is at least 2% lower than your current rate (the higher the better) it is usually a good decision to refinance.

Here, I have included 3 benefits to refinancing a home mortgage with a lower interest rate:

1)Lower the monthly payments – Lowering the finance rate of your loan will make an obvious difference in your monthly mortgage payment. Every little bit adds up in the long run. The actual savings though are dependent on your personal financial situation. Make sure to consult a mortgage lender for more information.
2)Changing the type of home loan you currently have – Sometimes a homeowner may want to refinance even if they will not see monthly savings. Many homeowners are in an adjustable rate mortgage and would like the stability of a fixed rate mortgage. Also, some homeowners look to actually shorten the length of their loan, fully taking advantage of lower mortgage rates.
3)Cash out refinancing – Typically, if you have lived in your home for over 10 years, you have built up a good amount of equity due to appreciation on your homes value and the mortgage payments you have been making for quite a while. Sometimes a homeowner wants to use this to help finance a major purchase or debt they have acquired and then pursue a cash out refinance.

Make sure to talk with professional mortgage lenders when looking to refinance your home. If you refinance the right way you can save a lot of money however if it is done wrong it will cost you a lot of money. Patience and basic research are your best tools to save a lot of money when refinancing your home mortgage.

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