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Home Loan Refinancing

Getting a Home Loan - Know your Mortgage Basics Here

Refinancing a home mortgage can be done for many different reasons. A homeowner may want to take advantage of interest rates that are lower now than when the person took out the first loan. This can be especially advantageous if they’ve got an adjustable rate mortgage that’s about to be adjusted to much higher monthly payments. If they refinance to a fixed rate mortgage instead, at a lower rate, they can save themselves a lot of money.

A new home loan can also be a vehicle for consolidating several debts into one, in order to make payments easier, not to mention saving on interest at different rates for different loans. Or the person might just want to refinance their mortgage to take advantage of available home equity to pay for a larger special project, like a wedding or renovations.

Refinancing to get a lower interest rate or lower payments has often been thought of as a wise investment move. But in a time of recession following the near-collapse of the financial industry, making this move might have little to do with home ownership as an investment, and much more to do with the homeowner’s very survival. With so many people being forced to take pay cuts just to stay employed, or being uncertain whether they’re going to have jobs at all in the future, many are trying to reduce their cash flow as much as humanly possible. If they can pay down other debts, or free up extra money every month to start building some savings, it might make their financial burden lighter in the present moment and give them a cushion that could help them make it through tough times in the future.

The homeowner should be aware of some possible pitfalls and obstacles, though, in their quest to refinance their home mortgage. One of them is that many financial institutions are pretty gun-shy about home loans in general right now, after the sub-prime mortgage schemes led the world to the brink of financial disaster. Even making the more standard loans to more reliable borrowers causes banks to be nervous these days, so the person might have to look long and hard to find someone willing to make this refinancing loan.

Another potential pitfall could be extra costs associated with the refinancing. For example, there may be closing costs that completely wipe out any savings that would have been brought by moving to a slightly lower interest rate. The borrower could discover that they end up paying more rather than less, if they refinance. It would make no sense at all to go ahead under circumstances such as that. But if they can discover a way to refinance their loan that costs less, even after all extra charges are factored in, then they would do well to try it.

The wisest course is for the homeowner to shop around and speak to several different lenders. Some won’t be interested at all, while others may be willing, and will offer varied types of loans or interest rates. A qualified mortgage broker will have a handle on the types of options that are available right now, and may be able to find the person the type of home loan refinancing they need.

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