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A Consumer's Guide to Mortgage Refinancings

Would Refinancing Be Worth It?

Refinancing can be worthwhile, but it does not make good financial sense for everyone. A general role of thumb is that refinancing becomes worth your while if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate. This figure is generally accepted as the safe margin when balancing the costs of refinancing a mortgage against the savings.

There are other considerations, too, such as how long you plan to stay in the house. Most sources say that it takes at least three years to realize fully the savings from a lower interest rate, given the costs of the refinancing. (Depending on your loan amount and the particular circumstances, however, you might choose to refinance a loan that is only 1.5 percentage points higher than the current rate. You may even find you could recoup the refinancing costs in a shorter time.)

Refinancing can be a good idea for homeowners who:

• Want to get out of a high interest rate loan to take advantage of lower rates. This is a good idea only if they intend to stay in the house long enough to make the additional fees worthwhile.
• Have an adjustable-rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.
• Want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have.
• Want to build up equity more quickly by converting to a loan with a shorter term.
• Want to draw on the equity built up in their house to get cash for a major purchase or for their children's education.

If you decide that refinancing is not worth the costs, ask your lender whether you may be able to obtain all or some of the new terms you want by agreeing to a modification of your existing loan instead of a refinancing.

Should You Refinance Your ARM?

In deciding whether to refinance an ARM you should consider these questions:

Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be two or three percentage points higher than the prevailing rates being offered for either fixed-rate loans or other ARMs?

If the current mortgage sets a cap on your monthly payments, are those payments large enough to pay off your loan by the end of the original term? Will refinancing to a new ARM or a fixed-rate loan enable you to pay your loan in full by the end of the term?

Provides Multiple Financial Solutions

Today's trend of mortgage refinancing has revitalized how consumers view their homes and their credit. By going through the mortgage refinancing process, many consumers learn that a mortgage isn't simply a way to purchase a house over time; it is also a valuable and modifiable credit resource that can be managed to provide an optimal level of comfort and security. Whether you are interested in mortgage refinancing in order to leverage today's low mortgage rates, as a form of debt consolidation, or as a way to fund an important expense like your child's education, there are several resources to help you determine the right solution for your needs. Simply beginning to understand how your mortgage could work for you, instead of against you, can help you to feel the comfort of fiscal freedom. Filling out the form below can help provide the information you need to start down a path towards greater financial happiness.

Online Mortgage Refinancing Resources

Most mortgage refinancing companies offer convenient, personal service. After filling out a simple form like the one above, you will receive an answer from a trained mortgage refinancing specialist who can help you decide what kind of arrangement would be right for you.

After you receive an answer, we recommend trying an online mortgage calculator to see just how much you could be saving, or using a mortgage refinancing calculator to learn how quickly your refinanced mortgage will begin paying off. These resources, provided free to consumers, can help you determine exactly how refinancing your mortgage will improve your financial situation for years to come. Mortgage refinancing might be the solution to your financial problems, and since it costs nothing to get a quote, there's simply no excuse for waiting. Starting building a healthy financial future today!