Home Mortgage Loan Refinance - Refinancing A Fixed Rate Mortgage

Refinancing a fixed rate mortgage is usually only suggested when interest rates fall, but you can also save money by changing your loan terms. You can also pull out part of your equity to pay bills or renovate.



Lower Interest Rates



In general when interest rates are at least 1% lower than your current mortgage rate, it pays to refinance. But you need to consider other factors, such as the length of your mortgage, loan costs, and how long you plan to stay in your home.



An adjustable rate mortgage (ARM) should also be considered if you plan to move soon. With rates lower than a fixed, you will see lower monthly payments. But you have the risk that your rates and payments will increase over time.



To help decide if refinancing makes sense for you, calculate the difference in interest payments over the course of your loan. Online mortgage calculators can help you find both total interest costs and monthly payments.



Better Loan Terms



Besides lower interest rates, you can save money by converting to a better loan term. A shorter loan, such as a 15 year term, can save you thousands on interest payments, even if you dont have a lower interest rate. However, your monthly payments will be 10% to 15% higher.



You can also reduce your monthly payments by refinancing for a longer term. You trade lower payments for higher interest costs.



Access Your Equity



Whether you want to pay off credit cards or pay for your childs education, you can pull out your equity by refinancing. One of the advantages of using your equity is that your interest is tax deductible.



However, if you just want to tap into your equity, a better option is a home equity loan. You can pull out your equity, write off your interest on your taxes, and avoid loan fees.



Online Lenders



Online financing companies allow you to research terms and fees from your home. You can receive quotes within minutes online, so you can compare finance packages. You can also apply online and qualify for discounts on closing cost with some lenders.






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