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Refinance Mortgage: a Basic Guide for the General Public

By Crowin Smith Subscribe to RSS | November 30th 2011 | Views:

Nobody is in a better position to determine whether refinancing would work or not aside from a fully informed borrower. If you wish to avail of refinancing options available in the market, the best way to start your preparation is to get as much information as you can about mortgage refinancing.

The most important question that will enter your mind is whether or not refinancing is the best option for you. Some would say that if you bought your house with a low rate mortgage, you are lucky because you don’t have to go through the pains of refinancing. However, that might no longer be true considering that refinancing could still work wonders for those who have low rate loans. As a matter of fact, refinance mortgage options do work for investment purposes.

Despite the proven benefits of mortgage refinancing, it does not work just for anyone. Refinancing is worth it if your current loan’s interest rate is 2% higher than the industry and market rate. Two percent is the widely accepted margin used when balancing the refinancing costs and the actual amount of savings you can get. Other factors includes whether or not you are planning to stay in your home for a long period of time. According to most experts, it takes around a period of three years before you can reap the full benefits of refinancing to a loan with lower interest rate.

Generally speaking, refinancing is recommended to those who:

- Wish to switch from a high interest rate mortgage to benefit from lower interest payments. This intention best works for those who wish to occupy their home up to the point when the additional costs are worthwhile.

- Currently have a variable rate loan but want to get a fixed rate mortgage instead to eliminate the need to worry about possible mortgage rate hikes. A fixed rate mortgage allows you to more efficiently plan your budget because you don’t have to create headroom in anticipation of any mortgage rate increase.

- Seek to convert their variable rate loan to get better rates and features.

- Want to quickly establish equity on their property by getting a loan with a shorter mortgage term.

- Like to utilize the stored equity in their properties to fund financial needs.

If in any case you feel that it’s not worth it to refinance, you can simply seek the advice of your lender or broker and try to negotiate if they could agree to have your mortgage modified.

If managed carefully, the refinance mortgage option can provide excellent results not only financially but also security. If you are one of the many people who are contemplating this financial option, you should carefully think things through with the help of a professional broker or lender.

Crowin Smith - About Author:
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