Like many Americans, you may be paying higher interest rates on your mortgage than you need to be. Why not put money back in your pocket by refinancing at lower interest rates? Even a small reduction in your interest rate may save you more than you think, and at today's low-cost refinancing options its well worth investigating.
Refinancing your mortgage rate is a very similar process you encounter when obtaining your first mortgage. Essentially, you will be applying for a second loan that will replace your first loan using the same assets for collateral. There is a large variety of loan programs available today, many that can save you money, reduce your current risk, and cash out your equity.
With a lower interest rate you may be able to:
- Convert an adjustable rate to a lower fixed mortgage rate, or reduce your current fixed mortgage rate. This is the most common reason for refinancing; simply taking advantage of available lower rates can save you hundreds each month.
- Cash out some of your equity for home renovations. By refinancing your home for renovations or improvements, you will be adding comfort to the home now, and increasing its value for the future.
- Remove your mortgage insurance. If you were required to purchase mortgage insurance on your first loan, and have now reached at least 20% equity on your home, you can almost certainly save money by refinancing and removing your mortgage insurance.
- Pay down the principal of the loan. Shorten your loan term and build your equity faster.
Before you consider refinancing, you will need to evaluate a few things. For instance: how long you will be in your home, how you may use your equity, and how refinancing will support your financial goals. Factors like these will play a part in your decision to refinance.
Once you are ready to talk to lenders, remember to be prepared. The more information you have ready about your current mortgage, home value, etc., the faster and more accurate your quote will be. Try to get at least four quotes - keep in mind that some lenders will have better deals than others. There are many lenders that provide mortgage calculators right on their websites (see http://www.mortgagerefinancing-a1.com/mortgage_rates/mortgage_refinance_calculator_breakeven.htm), making it easy for you to get a variety of quotes quickly. It is to your advantage to shop around and find out what kind of interest rates and payment plans various lenders are offering right now and what may work best for you and your home.
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