When you are purchasing a
home, you may hear many terms floating around that are related to loans. One that you should pay
attention to because you may use it later on is "mortgage refinance." This is one of the best ways to
lower a monthly mortgage payment after you have been in your home for a few years. mortgage refinancing is basically getting a new home loan to
replace the current mortgage loan.
When you get your initial home loan, you agree
to a specific term, such as 30 years.
As you live in the home and make the payments over time, the principal amount as
well as the term decreases. If you have lived in the home for 10 years, you only have 20 years left on the term and your
principal will be at a lower number than when you first started. When you do a mortgage
refinance, you start with that new balance and then you can decide on the new term. If you opt for a new 30 year
plan, you can effectively stretch out the payments that were going to take you 20 years to make for 30
can see that this will lower your payments, and if this is one of the reasons you were going to do mortgage
refinancing, then you have really helped yourself.
However, there are a number of other options
for a mortgage
refinance that are not as streamlined, but that may be more
appropriate for your situation.
For instance, if you need to have some extra money to help get your kids into
college, you may want to go for a cash-out refinance. With this type of a
mortgage, you are pulling cash out of the equity you have in your home to use now. If you plan to do this, you
will have to have an appraisal done on the home, because you can't borrow more than 80% of the value of the
can make it harder to refinance nowadays than in years past because of the fluctuations in the housing
If you are struggling to make your payments
and your credit has also suffered, you may need a bad credit mortgage refinance. The interest rates on this type
of mortgage are a little higher than with a traditional loan, but by stretching the payment out longer, you may
be able to lower your payments to where you can handle them better. As you can see, there are
several reasons that a mortgage refinance could be a good option for you.