When You Should Refinance a Mortgage
 
   

There are several reasons for mortgage refinancing with the most popular reasons being to lower your monthly mortgage payment and thereby increase cash flow, to switch from an Adjustable Rate Mortgage to a fixed rate mortgage, and to eliminate private mortgage insurance. Generally, it is a good idea to refinance your mortgage if the interest rate falls at least two percent below the rate your are currently paying on your mortgage.

Lowering the monthly mortgage payment is one of the most common reasons for refinancing a mortgage. To determine the costs involved and the amount of the new payment to refinance a mortgage, ask your mortgage source what costs are involved. You can figure out how long it will take to break even by figuring out your monthly savings. If you plan to keep the refinanced mortgage longer than the break even point, it is to your advantage to refinance. This increases your cash flow each month.

Another reason for mortgage refinancing is to swich from an Adjustable Rate Mortgage, or ARM, to a fixed rate mortgage. Adjustable Rate Mortgages increase after a specified amount of time and increase your mortgage payment. With a fixed interest rate, you know your mortgage payment will not increase. Although interest rates on fixed mortgages are often higher than the interest rates on Adjustable Rate Mortgages, you are secure in the knowledge that your interest rate will not increase.

Eliminating the cost of private mortgage insurance is another popular reason for mortgage refinancing. Typically, you have to buy private mortgage insurance when you purchase your home with less than a twenty percent down payment. As your home appreciates in value and your loan balance decreases, your equity in the home will exceed twenty percent. You may be able to eliminate the private mortgage insurance by refinancin if your mortgage is more than two years old. You can refinance your mortgage and get rid of the private moregage insurance if your home appreciates in value and your loan balance is less than eighty percent of the value of your home.

In summary, the main reasons for mortgage refinancing include lowering your monthly payment, changing from an Adjustable Rate Mortgage to a fixed rate mortgage, and eliminating private mortgage insurance. Typically, if interests rates fall at least two percent below your current interest rate, it is a good idea to refinance your mortgage.


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Article Author: Al Zan
Author Home Page: Search optimization
Article Category: Money and Business
Article Topic: Money and Business
Article Keywords: Mortgage loan,Mortgage calculator,Mortgage loans,Mortgage rate,Mortgage calculator