Should You Refinance Your Mortgage?

Perhaps now you have a better credit rating than when you took out your original mortgage, which will allow you to get better terms this time around. Your credit history will also have an effect on your mortgage interest rate. Refinancing will allow you to build equity in you home more quickly, and you will also be taking advantage of the equity you have already built. If you previously mortgaged $100,000, and you currently have a payoff balance of $70,000, refinancing could dramatically lower your monthly mortgage payment.

Before you decide to proceed with refinancing your mortgage, there a few things you should consider:

How much longer do you anticipate living in your present home? - If you will be living in your home for at least two or three more years, you should be able to overcome the costs of refinancing by lowering your mortgage interest rate. If your move will be sooner, you may find that the cost of refinancing will outweigh the potential savings from the new, lower interest rate.

If your goal in refinancing your mortgage is to build equity in your home, you might want to consider changing the length of your mortgage. By changing from a standard 30 year mortgage to a 10 or 15 year mortgage, you will build equity much more quickly. Applying additional payments toward the principal will also allow you to build home equity at an accelerated rate.

If you currently have an adjustable rate mortgage, or ARM, you have an excellent reason to refinance. While ARM,s tend to have lower initial interest rates than fixed rate mortgages, with mortgage rates near all time lows, now may be a good time to lock in a low fixed interest rate.

Consider how your credit status may have changed since you took out the first mortgage on your home. If you were forced to take out a sub prime mortgage because of poor credit, you probably have a much higher interest rate as a result. If you have worked to successfully increase your credit score, you should take advantage of this change in credit status and refinance. Your interest rate and monthly mortgage payments could now be much lower. , When you refinance a mortgage, you will go through a process similar to the one you underwent getting your original mortgage. You will have a good deal of loan paperwork to complete, and the lender will examine your income, employment history, credit record, and the amount of debt you carry. They will also want an appraisal, as the value of your home may have changed, affecting the amount of equity you have. Some of the fees you will incur when refinancing include closing costs, application fees, title insurance, points, and the cost of the property appraisal. Be sure to discuss these fees with your lender before commencing with your mortgage refinance.

No one knows with 100% certainty what will happen to interest rates over the next several years; however, from a historical perspective they are presently a bargain. If you find that refinancing your mortgage could benefit you financially, do some research to find the lender with the best rates and terms. Then don't procrastinate; if interest rates fall further you can refinance again. In all likelihood, interest rates will rise in the not too distant future, and you may regret not refinancing when you had the opportunity.

About the Author:
Gregg Pennington writes articles on a number of topics including mortgages, loan consolidation, and other loan related topics. For more mortgage information visit www.onlinemoneysources.net/mortgage.html . To find a loan or other sources of money visit www.onlinemoneysources.net .