Refinancing can be an intimidating concept for many people. That is why I will try to explain it in the simplest terms throughout this article. Due to the current status of the housing market many homeowners are looking into the possibility of refinancing their current home loans. Refinancing has become a bit more popular even though the interest rates are not at their lowest. The whole process may seem a little confusing and a bit overwhelming at first but with some explanation it can be easily accomplished.

It is very common for first time home buyers jump on the first offer given to them. People jump on offers most times because they feel that they can not get anything better because of their credit. However, there are many financial institutions that offer financing options and it is a big mistake not to take a careful look at all of your possible options. When one does take the first thing that is offered they are happy for a short period then reality will sink in after paying that mortgage a few times. Now however many of these same people are in a better financial situation and are looking to change their current loans terms. Whatever your reasons for considering a mortgage refinancing or modification loan may be there are a few things that you should keep in mind so that you know that going through the process will be worth it in the end.

When you decide to refinance your current mortgage loan, what you are basically doing is taking out another loan to pay for the one you already have. If you are thinking of refinancing a loan that you have had for some time, the new loan will not have to a large one because you have already paid a good amount of it. Since you have paid a good portion of the original loan your new payments will be much lower. The monthly payments may also decrease if you get a lower interest rate.
The most important thing that you must keep in mind is the interest rate. In order to make your that refinancing is worth the time and effort the interest rate must be a minimum of 2% less than the current rate. This would be the most important thing unless you are refinancing because of soon to be out of control payment because of an adjustable rate.

Double checking your mortgage documents when refinancing is also recommended so you can make sure that you don’t have any prepayment fees. If these fees are in the documents make sure to take the fees into consideration and look at the total costs the loan will come along with. It’s common to see lenders advertise themselves as not charging closing cost; however those costs are just added to other places in the loan. All lenders charge closing one way or another. Make sure that refinancing is the right step for you. Do research on the lender you want to work with and get different quotes so you are sure that you got the best possible loan.

-M Petrone

Subscribe via email

Enter your email address:

Delivered by FeedBurner