A home mortgage refinance is basically just replacing your current home mortgage with a new home mortgage. There are 2 general types of refinancing. The first type is simply a home loan for the exact same amount as you owe on your current mortgage. For example, if you owe $100,000 on your current mortgage, using this refinance type you would refinance for the same $100,000, ideally with better interest rates, terms or conditions. The second choice is referred to as a cash out refinance. For example, say you owe $100,000 in 20 years on your current mortgage. You could use the second refinance choice and get a new home loan for $150,000 over 25 years and pocket the difference, $50,000.

Refinancing a home mortgage can help homeowners in a number of situations:

-If your credit score has improved since purchasing your home you most likely will save a lot through refinancing. Add to that the fact that home interest rates are near all time lows across the country right now and the savings can be huge.

-If you are looking to reduce your monthly mortgage payments even more, extending the length of your home loan is another option. You will be paying more interest in the long term but the monthly payments will be much smaller.

-You can use a cash out refinance to pay off other debts or bills you have. This can help pay off other high interest payments and save even more money.

-If you have 2 loans which you pay on, refinancing will allow you to consolidate those loans into 1.

-Homeowners who have an ARM (Adjusted Rate Mortgage) and are looking to get into a more stable fixed rate loan can refinance into one.

-If you refinance your home and have enough equity in it, you can often avoid having to get PMI (Private mortgage insurance) or drop down in interest rates.

Refinancing a home loan can be a great financial decision that could save you thousands of dollars. The interest rates around the country are near all time lows and their has never been a better time to refinance. However, refinancing a mortgage the wrong way will cost you a lot of money, and possibly your home. Make sure you practice patience and do some basic research with potential mortgage lenders or banks before making any decisions.

-M Petrone

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