Why Refinancing Your Mortgage Isn't Necessariltythe Answer to All Your Problems

A Home Buying Article Contributed by Robert Scalia

When it Comes to Refinancing Your Mortgage, Think before You Act

There could potentially be a million reasons why people are suckered into refinancing their mortgage.

For some, the promise of lower monthly payments, for obvious reasons, is simply to attractive to pass up - particularly if the bills are piling up. Other like the idea of consolidating their outstanding debt by combining the firs mortgage and second one into a brad new one.

Of course, not all the reasons are desperate ways to clear their financial names. Some see refinancing their mortgage as a way to tap into the built-up equity in their homes. Others still are simply tired of getting the shorter end of the deal on their present mortgage and simply want to start afresh.

Whatever reasons you have for refinancing your mortgage, keep in mind that rules must be followed when making this decision. And beware, satisfaction isn't always guaranteed.

What are Some of the Steps You'll Have to Follow If You Plan on Refinancing Your Mortgage the Right Way?

When you talk about refinancing your mortgage, people always talk about the famous 2% Rule of Thumb. That might work for some, but I prefer to let the factors of time and cost decide. Remember, refinancing a mortgage takes time. And time is money.

Another thing you might want to think about is how much money you're looking to borrow. Most lenders are willing to let you borrow approximately 80% of your home's current appraised value. If you're refinancing your existing mortgage that they gave you, they might even push that limit. But if you're looking to go the equity route, don't hold your breath.

And keep in mind that taxes can make refinancing your mortgage costly. Some states charge more than others through what are commonly known as 'mortgage taxes', 'realty transfer taxes', 'mortgage recording fees' and others. Expect these various taxes to add almost 2 per cent to your closing costs.

You also have to keep track of 'discount' and 'origination' points that can also add to this costly endeavor.

Remember that not all mortgages are the same when it comes to refinancing. Choosing the wrong one can cost you in the end - even of the interest rate is low to begin with.

And with any type of mortgage refinancing, there are the closing costs. . The appraisal of your property, researching your title to the property, title insurance, credit checks and even attorney review fees are all fair game when it comes to refinancing. A few thousand dollars in fees isn't uncommon.

Are There Ways to Save Money When Refinancing Your Mortgage?

If you're looking to cut down on the closing costs of refinancing your mortgage, you might want to go ahead and update your title insurance policy, rather than being lazy and taking out a new one. You can also drop your Private Mortgage Insurance rate, but you will need to make sure that you put down less than 20% down on the property.