If you are a homeowner who bought your home when interest rates were higher, then perhaps you should consider refinancing your mortgage. Mortgage refinancing is the process of paying off one loan with the proceeds from a new loan using the same property as security.
Along with lower mortgage payments, the homeowner benefits by building equity faster and having more disposable income available for paying off high interest rate bills; college funds and home remodeling projects.
There are a couple of factors the homeowner should take into consideration before deciding if mortgage refinancing is a worthwhile financial option. If the homeowner's current interest rate on their mortgage is 2 percent higher than the current average market rate, then refinancing is a viable option. Another factor to consider is the length of time the homeowner plans on staying in the house. In most cases, it takes approximately 3 years to reach full financial benefits of lower interest rates.
Mortgage refinancing can also benefit homeowners if they have and adjustable rate mortgage (ARM) and would prefer a fixed rate loan, or would like to convert to an ARM with a lower interest rate.
Another popular option draws on the equity already built up by the homeowner. This is often referred to as a "cash out" refinance. The homeowner can use a portion of the equity that has accumulated in their home and receive cash at their loan closing. Equity is what the home is worth minus the amount still owed on the mortgage. This equity offers the homeowner immediate cash available to pay off loans, invest in home improvements and to save for children's college funds.
If the homeowner should decide that mortgage refinancing is not a worthwhile option, then they should ask their lender whether modification of their existing loan would obtain all or some of the new terms they are seeking.
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