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A refinance mortgage can be the option for many homebuyers who did not receive the best deal on a loan when taking out their first mortgage. Were you a first time homebuyer or you had bad credit the first or last time you obtained a loan? Now you are on your feet and make a salary that could help you receive the best interest rates and more monthly payment towards the principal. Maybe you are looking to refinance your mortgage so you can free some cash for a new car or for someone in your family to go back to school. There are many options available when you refinance your home.
Before you decide if a refinance mortgage is right for you, look at your current financing situation. Do you have a fixed rate loan or an adjustable rate? How long do you plan to be in your home after you obtain the refinance mortgage? What is your ultimate goal causing to desire a refinance mortgage? Most people want to refinance so they can free or access more money now. A refinance mortgage is a great solution, but is a refinance of your loan the right solution for you?
The first step is making contact with you lender and be aware how much your interest rates and monthly payments are now. It is also helpful to find out how much you have paid of your mortgage towards interest and how much you have paid towards the mortgage principal. Since you will refinance the amount left on the mortgage principal, and not refinance the original mortgage amount, it is really important to know how much principal is left. If you have a low principal left, it may not be in your best interests to refinance, certainly not for a 30-year mortgage. Also, the interest rates may be rising rapidly at the time so you may consider a fixed rate loan, but are you currently still paying the 3/1 or 5/1 fixed rate on your mortgage and plan to move soon? If so, a mortgage refinance will cost extra refinance charges that may not benefit you in the long run. If you plan to stay in your home for a length of time and still have a sizeable principal left on your loan, then a mortgage refinance may be a good option for you.
Just as with most conventional loans, a refinance mortgage offers similar options of adjustable and fixed rate mortgages and anywhere from 10-40 year loans. Be sure to go over with your mortgage broker or lender the reasons you are interested in the refinance mortgage; do you need to refinance to obtain cash for home improvements or for a new car purchase? These are important factors to make your lender aware of as you are deciding how to refinance your mortgage, or if the refinance is even in your best interests.
One of the biggest reasons people refinance is because they found another lending company who will give them a better interest rate or a better deal on a loan. Remember that there are rules about disclosing to the second lender the mortgage you had with the first lender; so be sure to be upfront and honest about your first mortgage, so that you can hear all the mortgage refinance options for you.
Another major factor that determines whether borrowers refinance is interest rates. Current mortgage interest rates can rise and this often scares refinance borrowers who have ARMs because they are afraid the adjustable rates will rise after they refinance. It is difficult to assess what will happen to the adjustable refinance mortgage interest rates over the next few years. If you refinance into a fixed rate mortgage during a high interest rate period, then when interest rates go back down, you are stuck with a high fixed rate mortgage and another decision about whether or not to refinance again. Other mortgage brokers may tell you that there is no sure way of telling if interest rates will ever go back down. Of course the only sure-fire way of knowing if you should apply for a refinance mortgage is to assess your reasons for the refinance and how it will affect you in the future.
Special Mortgage Types
The 40 Year Mortgage
Buy to Let
Adjustable Rate (ARM)
No Cost Mortgages
Ready to Refinance?