Refinancing a Mortgage: The Essential Guide to Saving More Money on Mortgages


A lot of homeowners may have been enjoying mortgage rates that are lower than what you have right now, only it isn't easy to admit . Why? Simply because obtaining lower mortgage rates isn't that easy. First, you have to think of the refinancing options that mortgage lenders will provide you in case you want to lower your rates. Lending companies wouldn't give you something good without the necessary qualification.


So the next step is for you to consider if it is time for you to refinance your mortgage. Some people think that refinancing their mortgage will be a great deal easier to do because of the financial history they've built with the company. Most of them believe that refinancing is always a good option for getting lower rates. In some ways, refinancing a mortgage can be a good idea, but it still hinges upon the situation or on the type of mortgage that you have.


Lending companies may no longer need new research on your properties or a simple property assessment. In most cases, lending companies are also willing to give lower rates.
All of these things are easily provided to those who wish to refinance their mortgages because lending companies believe that it's easier to maintain a paying customer than to find another one.


So the question now lies on whether it is time for you to refinance or not because not all refinancing options are created equal. This goes to show that every refinancing option may differ from the others and would entirely depend upon the sort of program you wish to pursue.
For example, would you like to have a plain refinancing option for your mortgage? Or would you like to have lower rates and still cash out to pay down other debt?


Before you can decide on such things, it's best that you consider first the reasons why you're refinancing your mortgage in the first place. Here are some of the common reasons consumers make whenever they decide on refinancing their mortgages:


1. To gain benefit from an enhanced credit rating
Some people are lucky enough to get mortgages despite their bad credit rating. However, they may have to suffer the consequence such as having higher interest rates. As time goes by, these consumers try to establish their credit rating by paying their payments on time. Nevertheless, having high rates of interest can be very expensive to maintain. That's why they opt to refinance and desire for lower interest rates.


In this way, refinancing now could be the best time for you to save more rather than to continue paying higher rates of interest despite your good credit rating. Besides, maintaining higher interest rates may only bring you troubles considering the fact that at any point in time, you may not be able to sustain higher interest charges.


2. Modify your loan
If you've chosen an adjustable mortgage rate in the first place, you may find it reasonable now to acquire a fixed-rate mortgage considering the discrepancies on the interest rates. Adjustable rate mortgage may appear very low at some points in time because they're primarily contingent on the different factors that affect the interest rates set by the Federal Reserve System. But then again, adjustable rate mortgage can change a maximum of twice a year. So that goes to show that interest rates such as these can change from time to time. So to speak, you can get either a lower or a higher rate depending on the kind of adjustable rate mortgage you have.
On the other hand, fixed-rate mortgage can give you lower rates ultimately because they don't change whatever happens. So if you want to convert your loan into a fixed-rate mortgage, you have to refinance your mortgage.


3. Get a lower interest rate and cash out and pay other debts
Some consumers want to have a better deal. They want to refinance their mortgage but would also like to cash out at closing so that they can use the money to pay their other debts.
It's like hitting two birds with one stone. There are some people taking control of their home equity whenever the prime rate is lower than the standard rate of a fixed-rate mortgage with a 30-year pay out plan.


Financial experts say that getting home equity is the better option at this point because the rates will be cheaper. However, as time goes by, cashing out and still getting lower rates through refinancing options remains the best choice. Refinancing your mortgage to a lower rate and still get to cash out to pay your other debts would simply mean getting more than what you presently have a loan from, and subsequently taking the change. For example, you have an existing loan of $50,000 on a $90,000 house. You've decided to get a lower interest rate on that loan and still get $10,000 cash to pay off your auto loan.


Through cash-out refinancing, you can easily get your heart’s desire by refinancing your mortgage from $50,000 to $60,000. In that way, you were able to lower your mortgage interest rate on your standing balance of $50,000 and still get cash as you wish.


With all these things, refinancing might just be the answers to your prayers. You see, it really pays to know the difference. Don't just take somebody’s word for it. Work on it…now!