Refinance

So you want to refinance. The number one reason people refinance is to lower the rate they are paying on their existing mortgage.

By lowering your interest rate you are in a sense lowering the fee the lender is charging you to borrow the money. Refinancing will save you money on a monthly basis, and literally thousands of dollars over the life of the loan.

Some other reasons people refinance is because their original mortgage was a special product such as an interest only mortgage or an adjustable rate mortgage. (ARM)

Before refinancing, be sure there isn’t a prepayment penalty on your existing mortgage. A lot of mortgages do have prepayment penalties for the first three to five years, so make sure you don’t have one.

Refinancing

Refinancing is the act of acquiring a home mortgage loan in order to pay off your existing mortgage.

This is normally done for different reasons.

To name a few, people will refinance their existing loans to get a better rate to save money on interest charges. This serves two purposes. It will ultimately save them money on their monthly payment, and it will save them a lot of cash over the life of the loan in finance charges.

People are also known to refinance after having lived in their home long enough to have acquired some equity. They refinance in order to liquidate some of that equity, and use the money to do home improvements, pay college tuition, or pay down some credit card bills, etc.

Refinancing in order to liquidate your equity can be done in one of two ways. You can get one loan to pay off your existing mortgage, with enough cash back to accommodate whatever other financial needs you had in mind.

Or . . .

You can get a home equity loan or second mortgage. This is a best case scenario if you are happy with your first mortgage and would like to leave it the way it is. The home equity loan is also recommended if you are looking for a small amount of cash, or if you need cash but don’t want to use it immediately.

Cash-Out Refinance

ARM Loans

Fixed Rate vs. Variable Rate Mortgages

Interest Only Loans

Mortgage Closing Costs

Mortgage Insurance (PMI)

Reverse Mortgage

Prepayment Penalty

Books about refinancing: