A majority of homeowners will be able to benefit from refinancing a mortgage into the low interest rates available today. However, to truly benefit from a home loan refinancing, the homeowner must have a financial goal and plan in mind. Refinancing a mortgage is a very complicated, big, and important decision that is entirely in control of the homeowner. There can be big rewards for the homeowner who properly goes about refinancing. There can also be some draw backs and costs that homeowners who are not prepared will get hit with. Here are the 4 most popular reasons people choose to refinance their home loan.

Switch from an ARM (Adjustable Rate Mortgage) into a Fixed Rate Mortgage

A lot of people who purchased a home during the good economic periods got into an ARM loan. While at the time it seemed ideal, things have changed for many homeowners since then. Now, homeowners are seeing their ARM loans increase in interest rate, which makes their monthly payments even bigger. The worse the housing market and overall economy got, the more the ARM loans went up. Refinancing though can offer a homeowner a chance to get into a new, fixed rate mortgage, that will not change on a whim. Fixed rate mortgages often have a slightly higher interest rate than an ARM loan. However a fixed rate loan will not increase in amount due every month, ever.

Switch from a Fixed Rate Mortgage into a ARM (Adjustable Rate Mortgage)

Many homeowners are in the position to actually benefit from an ARM loan. These types of loans offer very low introductory interest rates. These low rates typically last from 6 months to up to 5 years but vary by loan type and lender or bank. Homeowners may need a little relief for now knowing that in the future, their financial situation will get better. An ARM is also great for homeowners who plan on moving within a few years and who are expecting to sell their home. Not everyone will benefit from an ARM loan. In fact, most people will benefit from the stability of a fixed rate mortgage. However, for some people, an refinancing into an ARM will work great.

Cash Out Mortgage Refinancing

Many homeowners want to tap into the equity they have built in their home and borrow against it. This is called a cash back mortgage refinancing. This type of refinance will allow a homeowner to borrow against the payments they have been making into their home over the years. The money that is borrowed is often at a much lower interest rate than a typical loan. Also, the money can be used for anything the homeowner wants to use it for, with no restrictions.

Save Money and Get a More Affordable Monthly Mortgage Payment

Most homeowners will be refinancing only to take advantage of ultra low interest rates, like those available now. By reducing your home loans interest rate by just 2%, a typical homeowner can see big savings every month on their home loan. The more interest a homeowner can shave off when refinancing a mortgage, the more they will save. An overwhelmingly large amount of homeowners are only interested in refinancing so that they can get into a lower interest rate and better overall mortgage. Which is why right now, with mortgage interest rates near all time lows, is a great time to refinance.

Everyones situation is different. Everyone wants a different outcome when refinancing a home loan. Nobody is going to get the same exact deal as someone else. It is important for a homeowner to take their time, get a financial plan together, and take action. Homeowners should always contact a variety of mortgage lenders and banks to see what option is best for them and their goals.

-M Petrone

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