When you refinance a home loan, all you are doing is getting a new loan, ideally with better rates terms or conditions, and replacing your current home loan with it. Refinancing a home mortgage is a great way to take advantage of lower interest rates, or improved credit and reduce your monthly mortgage payment by hundreds of dollars. A home refinance in which you get a better interest rates will free up a lot of extra money which you can use to further reduce or pay off other debts or financial burdens. Also, refinancing out of an ARM (Adjustable rate mortgage) and into a fixed rate mortgage is a great way to stabilize monthly expenses and lock in a low interest rate. Refinancing a mortgage and getting cash back from the equity you have built up is also another popular option. Many homeowners who are facing large cash expenses such as medical bills, tuition, large expensive credit card debts, use a cash out refinancing option to get the money they need. As an example, say your home is worth $200,000, you $100,000 and you have 15 years left to pay on your mortgage. You could refinance into a new loan which is for $150,000 and pay it off over 20 years, while pocketing the $50,000 difference. This money can then be used to pay down other debts, or used for home improvements to further increase the value of your home.

When should you refinance your mortgage?
You should look into refinancing a home loan when you notice that current average interest rates are significantly lower than the rates you have. Or if you know for certain that since purchasing your home your credit has improved. If you have an ARM loan and have seen the interest rates rising and starting to get out of control. Of course if you have a large debt and need a good amount of cash you already are aware of the refinancing option to get cash back. Generally, a good rule of thumb to follow is that if you can get a interest rate that is 2% lower than your current interest rate, you will usually save hundreds on the mortgage payment every month through a proper refinance.

Refinancing a home mortgage the right way can save you a whole bunch of money on you mortgage payments every month. Be aware though that refinancing a mortgage the wrong way will cost you a lot of money and sometimes you home. A little patience and basic research on potential mortgage lenders, your credit history, and refinancing terms and conditions will be your best bet to ensure the absolute best refinancing deal you can get.

-M Petrone

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