The easiest way to understand refinancing is to think of it as applying for a loan to pay off an existing loan, secured against the same assets or property. For example, you have a mortgage on your primary residence, and when you applied for that mortgage you opted in for a fixed interest rate during your initial term. Now three to five years into your term your fixed rate is considerably higher than competing rates in the open market.
I guess at this point I'm screwed, right?
Not necessarily! This is where Mortgage Refinancing steps in. I can bet that your house is one of the largest assets you currently own. This also means that your mortgage payment is quite possibly the single largest monthly payment in your budget. When you refinance your mortgage you can also use the equity in your home, and enable this to become a reality. The lower your refinance rate, the lower your monthly payments are, and this means extra cash in your pocket! And while you're collecting that extra cash, your monthly mortgage payments are lowering allowing you to help your daughter pay off the rest of her student loan, or increase your monthly retirement savings contribution.
Am I still stuck with this 30-year mortgage?
Nope! A huge bonus when refinancing your home is that you can cut some time off the initial term of your mortgage. Let's say you originally signed in blood, for a 30-year term and have been slaving away making payments for 7 years. Mr. Mortgage Refinancing swings by and gives you the option of switching to a much shorter term i.e. 15 or 20 years. We're now looking at a possible savings in the thousands of dollars just in interest alone! To make your situation even better, why not maintain the same monthly payments as before? Why? This will build equity, and banks love equity. Leaving your monthly payment the same also means you are putting more towards the principal rather than the majority going towards interest. It's a win-win situation.
How about some cash in hand, is that an option?
If you need some cash in hand you can always go the Cash-Out Refinancing route. By using the equity built up in your home you can refinance at a higher amount than your current principal balance. This will enable you to take the extra funds as cash so you can get started on that new patio you've been dreaming of, or buy your husband those golf clubs he really wants for your 25thanniversary! I'm sure by now your getting a grip on the world of mortgage refinancing. When it comes to owning a home, it is required that you have a sense of discipline and flexibility. Many homeowners get comfortable with their long-time bank, and feel intimidated by all these options and forms they receive on a monthly basis to "sign up for this" or "get a plasma TV with a new mortgage". Beneath all the hype there is a market that is constantly fluctuating and it's waiting for smart, informed individuals to take advantage of its many services and products. If you do your homework, know what you can and can't do, you will be on your way to a more stable financial freedom.
So why limit yourself?
The homeowners market is no different from the stock market. Everyday rates are going up and down and it is up to you to learn the ropes and play the field. If you're afraid it will only hinder you in the end. Circumstances change, just like employment, and what you need out of that job or mortgage today may not be the same as your needs were 7 years ago. Sit down, re-evaluate, and make a decision. It's your money and your home, and the sooner you pay off your debts the sooner you can begin enjoying life.
E.B. Vieau has worked for some of the largest financial institutions in North America as a Financial Analyst, and Registered Insurance Broker within the Automobile and Residential sectors.
Visit http://www.LoanGateway.info now and find the answers you need regarding Home, Personal and Business Loans. Refinancing your home is easier than you think!
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