Home Mortgage Refinance

Home mortgage refinance loans make good financial sense whenever interest rates are low. When a homeowner refinances, the old mortgage loan is paid off and replaced with a new one at a lower interest rate. The monthly payment, as well as the overall interest, will likely be lower. With this type of financing, the term may be changed to a shorter length, resulting in saved interest by paying off the debt earlier. Equity can be built much more quickly by changing the term from 30 years to 15 years while substantially cutting the interest paid.

This can also be used to get out extra cash and is known as "cash out refinancing". This will allow the homeowner to get the difference between the old loan balance and the new balance at closing, providing they have adequate equity in the home. A home mortgage refinance loan may not be suitable for every homeowner. For example, if you are 20 years into a 30-year mortgage and refinance for another 30-year term, you will be paying on the home for a total of 50 years. Another instance in which it may not be economical is with a consumer who has poor credit. It is likely that a poor credit history may prohibit the homeowner from qualifying for the best interest rate and refinancing could increase the monthly payment and add to the total interest paid over the life of the loan.

An important thing to remember is that the lender may charge a loan origination fee, which could be equal to 1% of the total amount. Any points paid in refinancing are not deductible on federal income taxes in the year of the refinancing because the amount is amortized over the life of the debt. But, overall, if a comfortable amount of equity has been built up in the home, there are many options to cash in the equity whether obtaining a home mortgage refinance loan or a home equity loan. " I have made, and I will bear; even I will carry, and will deliver you." (Isaiah 46:4)

Another great benefit is consolidating high interest debts into the new home loan, in turn, saving a substantial amount of interest. Many homeowners with 15-year mortgage terms will refinance to a longer term of 30 to 45 years. This lowers their monthly payments and frees up more cash for month-to-month spending. The advantage of consolidating debts into a home mortgage refinance loan is that interest payments may not only be lower, but they are also tax deductible. Refinancing is also an opportunity to lock in at today's rates on a fixed rate mortgage if the original home loan is an adjustable rate mortgage.
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