Mortgage Refinancing
 
   

Mortgage refinancing is a transaction in which you essentially trade one mortgage for another. You take out a new mortgage with more favorable terms that pays off the old mortgage. Mortgage refinancing can help you by reducing your interest rate, lengthening the duration of your mortgage, and several other terms that work together or independently to drop your monthly payments. However, you may also find yourself paying a larger amount over the lifetime of the mortgage, depending on what terms you are able to get, and fees can add an unpleasant extra sum to your total. Before you decide upon mortgage refinancing, weigh these points to ensure that you get the best possible terms.

First, what will your real total payment be? If you maintain or decrease the length of your mortgage while getting a better interest rate, you will definitely pay less over the life of your mortgage. However, if you take out a longer mortgage, then interest will have more time to accrue, and you may find that not even a lower interest offsets the added payments. You may find that it is worthwhile to accept the mortgage refinancing anyway, since it is more important to you to lower your monthly expenses than to reduce the total you will spend on your mortgage. This kind of refinanced mortgage also gives you the flexibility to pay less now, when money is tight, and make larger payments in the future when your finances improve. If you can increase your payments enough in the future, you may even pay the same amount you would have paid for your earlier mortgage, or perhaps even less.

Second, how much will you pay in fees for mortgage refinancing? Refinancing a mortgage brings with it hefty fees for the title and escrow, as well as smaller but still notable amounts for credit fees, lender fees, appraisal fees, insurance, and taxes. You may find, after talking with the agent who is handling your mortgage refinancing, that you are still saving money after factoring in the fees. You may also be able to offset the fees by taking slightly different terms, such as a no cost mortgage, or by rolling the fees into the main mortgage balance.

Mortgage refinancing can be an indispensable way to reduce your monthly expenses and save money. However, it can also be a powerful tool for yanking money out of your wallet if you do not consider all the details carefully before you sign a new mortgage. Decide whether it is more important for you to drop your monthly expenses or to lower the total amount you will spend on your mortgage, and take account of how much the fees will add to your bottom line. Make sure your mortgage refinancing works for you, not just for your bank.

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Article Author: Al Zan
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Article Category: Money and Business
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