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For many home owners mortgage refinancing is often an attractive idea, as just lowering the interest rate on their mortgage by half of one percent could provide significant savings, particularly if there are many years remaining on the mortgage.
The interest rate amount that is set when home owners refinance mortgage will depend on their credit rating and the estimated market value of their home. It is easy to keep track of mortgage refinancing rates, as they are reported daily either in print or online. Each mortgage lender has their own set of rules, benefits, and fees, so buyers must evaluate refinance mortgage offers carefully when deciding what deal is best for them.
Mortgage refinancing would be a great advantage to home owners who presently have an adjustable rate mortgage, especially an interest only loan where the loan amount stays the same and they are not building equity. A mortgage which may be due for a readjusting soon could increase their mortgage payment more than they can afford, so home owners need to find an affordable fixed rate mortgage before that happens.
For those with mortgages who are considering a home refinance, there are some considerations that must be reviewed first. Home refinance can save hundreds of dollars a year in interest payments if done properly, but do not fall into the trap of refinancing just because you can.
Considerations of a home refinance include:
-- Home refinance rates
-- Length of mortgage
-- Adjustable or fixed mortgage
-- Time you plan to stay in your home
Home refinance rates can vary widely depending on the lender. Calculate your current annual mortgage payment and your projected home refinance rate and find out how much you will be saving annually. This will help determine if it is cost effective.
If you have been paying on your mortgage for 5 years and it was a 30 year mortgage, you will want to consider the added payments you will make if you pursue another 30 year mortgage when you are considering a home refinance.
Fixed rate mortgages are typically better for most borrowers; although for borrowers who plan to be in their homes less than five years, an adjustable rate mortgage may be a better alternative.
Make sure that you are aware of the downsides of a home refinance. Lower home refinancing rates do not always mean that they are a better deal than your current mortgage.