The average homeowner in the United States refinances their home mortgage every four years. You should know that there are a number of costly mistakes to be made when refinancing, mistakes that can add up to thousands of dollars lost. Here are the basics of mortgage refinancing that can help you avoid costly mortgage mistakes. The average homeowners financial picture changes every four years. This change could be in the form of higher income, better credit, or having more equity in their home. When this happens many homeowners refinance their mortgages to take advantage of their new financial situation. Before you decide to refinance your mortgage it is important to carefully consider the benefits and expenses involved. There are a number of reasons why homeowners refinance their mortgage. These reasons include qualifying for a better interest rate, raising or lowering their monthly payment amount, and cashing out equity in their homes. Get a Better Interest Rate If your financial picture has changed you may qualify for a better interest rate on your mortgage. Mortgage interest rates are still at historically low levels, if you are paying a higher interest rate now you could very well save by refinancing this loan. Qualifying for a better interest rate will save you money by lowering your monthly payment and paying less to the lender over the life of the mortgage. Switch to a Fixed Interest Rate If you financed your home with an adjustable rate mortgage and are concerned about rising interest rates you could find yourself peace of mind by refinancing to a fixed interest rate mortgage. By refinancing your mortgage to a fixed interest rate you will not have to worry about the monthly payment going up when the lender adjusts your mortgage. Raise or Lower Your Monthly Payment Why on earth would anyone want to raise their monthly payment? Many homeowners refinance their 30 year mortgages to a 15 year deal. The reason for this is to build equity in the home at a faster rate; raising your monthly payment in this manner will save you money by paying less interest to the mortgage lender. Other homeowners refinance to lower the monthly payment and ease their cash flow situation. You would do this by choosing a mortgage with a longer term, choosing a loan that offers payment options, and qualifying for a lower interest rate. Convert Equity to Cash Many homeowners tap equity in their homes for a variety of reasons. If you consider doing this remember that while you own the equity, the money is a loan that you will have to repay. You need to carefully consider your budget and what you can afford to repay before applying for a home equity loan. To learn more about refinancing your mortgage loan and avoiding common mortgage mistakes, register for a free mortgage guidebook. |
