Thursday, 15 September 2016

What You Need To Know About Mortgage Refinancing

With the current financial crisis and the tightening housing market, many people are finding it a little difficult to remain ahead of their repayment schedule. The growing cost of living and the narrowing incomes have meant that most homeowners will have to put on a little more struggle to be able to pay up their mortgage loans. The good news is that mortgage companies are offering to refinance homes to avoid the possibility of foreclosure. Mortgage refinancing is the process of providing a new loan to an already financed home.

During refinancing, the new loan is created to pay off the existing one and a new mortgage agreement is entered between the financier and the borrower. There are many reasons why people choose to refinance their homes, but the most common reasons include reducing the interest rates, increasing the repayment term or taking a cash out through the available home equity.

In a refinance option that targets the rates or the term, you create a new loan with either a lower interest rate or a longer repayment term. This does not involve taking a cash out but instead leave the equity of your home intact. Taking a lower interest rate or a longer term would mean a lower monthly repayment while a reduced term would mean a lesser period and a shorter life of the loan.

 When going for a rate and term refinance, it is important to calculate the actual savings per month created by the new loan compared to the previous loan. The other thing to look at is the cost of refinancing the home. Some of the common costs will include fees for letter origination, credit checks, appraisal and escrow fees. Next, you will need to determine the length of time you intent to stay in the house to be able to justify the monthly savings against the repayment amount. 

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