Home Mortgage Refinancing:
What is Refinancing?
If you are thinking
about the possibility of obtaining a home mortgage refinance
loan, you may have some questions ... including some
very basic questions such as "what is refinancing?"
Through this article, you will be provided with some
basic information about home mortgage refinancing.
Home Mortgage Refinancing Defined
Refinancing is the
process of using a new loan to pay off an old one. Usually
this is to get a better interest rate, lower payments,
or consolidate other debt to make it easier to pay off.
In any case, there are advantages and disadvantages
to refinancing, as well as a few strong cautions.
Refinances will have
the same process and fees as an original loan. Some
of these costs, like application fees and appraisals,
will have to be paid up front, so when figuring out
if refinancing is worth it, don’t forget to take these
costs into consideration. Some borrowers use online
calculators for mortgages, and others use various rules
of thumb published by financial advisors. Use both of
these tools and you will be better informed.
Purposes of Home Mortgage Refinancing
in the 21st Century
Some borrowers intend
to use the cash out method of refinancing and use the
money for everything from home improvements to a child’s
college tuition. While this seems like a reasonable
alternative for most people who have a lot of equity
in their homes—and lenders like to advertise this as
a magic bullet for a homeowner’s debt consolidation
needs—remember that there are other ways to borrow the
equity from your home. Compare your refinancing option
to a home equity loan or other credit products to make
sure you’re making the right decision.