An Introduction to Home Loan Refinance.
Home mortgage refinancing is just taking out a new loan, with better interest terms or conditions, and replacing it with your current home loan. This is a great option for homeowners who want to save money through improved credit rating or lower interest rates. This also can be a great choice for homeowners who are looking for a large amount of cash to finance a big ticket purchase such as, home repairs or improvements, tuition, medical bills, car loans, and credit or other debts. A cash out refinancing is when you take out a loan for more than your current mortgage is for and pocket the difference. No matter the reason, there are all types of home refinancing types available to homeowners in todays market.

When Should I Refinance?
Many homeowners have an ARM (Adjusted rate mortgage) and have seen their rates rise in recent months as the mortgage crisis kicked in. Refinancing out of an ARM and into a stable, fixed rate mortgage, is a financially smart decision to make. Although, exactly when the right time for a refinance is completely dependent upon your personal financial situation. With that said, it is important to ask yourself some questions prior to pursuing a mortgage refinance.

-How much equity do you currently have in your home?

-How much are you willing to give up or compromise in terms of length of loan, and terms and conditions are you willing to give up in order to get the absolute lowest interest rate you can?

-How long are you planning on living in your home?

-Is the cost of refinancing your home mortgage worth the savings that you will be getting? If so, when will you start seeing the savings (This is called the break in period)?

Refinancing a mortgage from an adjustable rate into a fixed rate.
It is usually the best decision to obtain a fixed rate mortgage. Refinancing out of an ARM and into a fixed rate is an option many homeowners pursue. Typically, a fixed rate mortgage offers long term financial stability and takes the guess work out of what your mortgage payment will be every month. However, if you plan on living in your home only for a few more years, an adjustable rate mortgage may not be a bad decision, and refinancing may not be the best choice.

Should I “lock in” an interest rate?
Although predicting future mortgage rates is both risky and impossible, statistically speaking, mortgage rates generally rise fast, and then slowly drop. So if you are thinking of refinancing you home mortgage, it is not a bad idea to act now and lock in a great interest rate. You always have the option to refinance a mortgage again in the future should interest rates drop again. However, as said earlier, every financial situation is different and locking in a rate may not always be advisable, but in general, it is.

Differences between the actual worth of your home and the estimated value.
A homes actual worth is determined by what home buyers will pay taking into account the property, neighborhood, and other factors. A homes estimated value is usually figured by taking into account other homes of comparable value, in comparable neighborhoods, that have been sold recently. The price usually used by banks and mortgage lenders is the actual price of your home should you sell it in todays market.

Although these are some useful tips, patience and research on potential mortgage lenders and banks are the best ways to ensure you get the very best refinancing deal possible. Refinance now, the right way, and save a lot of money, and possibly, your home.

-M Petrone

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