Mortgage refinancing today

If you are a newer home owner, the idea of mortgage refinancing can seen complex and more than a little daunting. But when you put it simply, this concept is easy to understand. When you do mortgage refinancing on your home, you are essentially replacing your old mortgage with a new mortgage. In doing so, you take the proceeds (or some of them) you get from the new loan and pay off the old loan. And if the new interest rate is cheaper, you save money. Plus, in some cases, mortgage refinancing also lets you use some of the equity you have gained on your home sooner than you might.

What follows is a good example of how mortgage refinancing works. When you purchased your home a year ago, you signed a 35 year fixed rate loan. When you signed the papers, the fixed rate was 6.7% interest, and now the rate has fallen to 6.1% interest. While 0.6% less in interest may not seem like a lot, it will save you $900 a year in payments on a $200,000 loan. Which makes it easy to see why mortgage refinancing would be so attractive.

Things to Consider Before you Refinance

When you start to consider mortgage refinancing for your home, there are many important factors to keep in mind. While it is important to check interest rates in order to calculate the savings you will receive from mortgage refinancing, it is also important to look into many other aspects of your mortgage. Refinancing is a huge decision that should only be made after careful deliberation. Considering mortgage refinancing? Then first take a look at:

1. The amount owed on the loan. If you plan to capitalize on any equity built up in the home, you'll need to look at the amount paid and owed. The proceeds left over from a new loan will be greatly affected by how much is owed on the old loan.

2. How long you are willing to pay. Oftentimes, refinancing your home implies extending the length of your mortgage. If, for instance, you have paid off 7 years of a 30 year loan, you may need to extend the loan another 7 years when you do your mortgage refinancing.

3. Your credit. If your credit has deteriorated since you purchased your home, you may have trouble qualifying for mortgage refinancing. There are stringent rules in place when refinancing a home, and most need decent credit in order to qualify.

4. You future plans. If you plan to own your home for ten years or more, mortgage refinancing can save your family a lot of money. If, however, you are considering selling your home within one or two years, you will not see much savings from mortgage refinancing.