One of the best things which happened recently is the near record drop in the mortgage rates. These low interest rates have made home loan refinancing popular amongst people.As stated previously, home loan refinancing has picked up pace recently and has become popular because of several reasons. Refinancing has many benefits and few of them are, the possibility of reducing your monthly loan payments by fixing in the most reasonable interest rate; moving on to a fixed interest rate for loan payment from an adjustable rate mortgage; availing benefits of low interest rates on high cost mortgages; availing cash from your investments; or refinancing a Federal Housing Administration (FHA) loan using an easy and streamlined process. Now let me explain you each of the mentioned benefits in detail.
Reducing Your Monthly Payments by Availing a Fixed Interest Rate Loan at a Low Rate
During the year 2009, mortgage rates were reduced close to record lows. It is always better to lock-in your interest rate as soon as you can if you are planning about refinancing. The chances of mortgage refinance interest rates increasing is much greater than their chances of decreasing, so the sooner the better. You should be cautious and should weigh your risks before delaying an interest rate lock if you have already qualified for a refinance home loan as it will surely help you to save a lot of money in the long run.
Moving on From an Adjustable Rate Mortgage to a Fixed Rate Mortgage
This is the right time to think about refinancing to a fixed interest rate mortgage, particularly if you have an Adjustable Rate Mortgage (ARM) that is positioned to adjust. Your Adjustable Rate Mortgage may increase to an interest rate that is higher than your current fixed rate mortgages. Although before refinancing you should think about the time frame for planning on being in your home. If you thin and plan to be in your home for more than 7 years then it may be a smart and an intelligent move to refinance to a fixed rate mortgage.
Take Advantage of Lower Rates on High-Cost Mortgages
Congress enlarged the dimension of single family residence mortgage loans that can be assured by Freddie Mac and Fannie Mae from between $419,750 to $713,000, in 2008, based on where the home is situated. This lead to the consequence of reduction in the interest rates for homeowners who are refinancing a higher priced home that is located in certain high cost areas. This leads to saving of hundreds of dollars savings per month, for high cost homeowners, who refinanced the current rates.
Availing Cash for Your Home that Has Increased in Value
Cash out refinancing helps homeowners to refinance their present mortgage by infusing another mortgage for more than what is currently owed and use the equity which they have built up in their house to repay the recent mortgage. This gives homeowner access to equity which they have built up in their home and gives them an opportunity to use it for good, for example college tuition, making home improvements, consolidating debt or availing a much desired vacation and so on.
It is a best practice to refinance after you have built up a considerable amount of equity in your home. If your property was bought more than 1 year previous to the refinancing, you can refinance your present mortgage for up to 85 % of the appraised value.
Avail a Lower Interest Rate on an FHA Loan through Streamlined Refinancing
If you at present have an FHA loan which has a good standing, then you can be benefited from streamlined refinancing. This could lead to substantially lowering your monthly mortgage payments. This refinancing selection is "streamlined" as it permits you to lessen the interest rate on your present home loan fast - some times exclusive of an appraisal.
It also helps in cutting down on the quantity of paperwork that is required to be done by your lender, thus saving you important time and money. There is no doubt that streamlined refinancing will reduce your monthly expenses by reducing the monthly payments, it does not present the cash back option. This works best for people who are in excellent financial position and have no major debt as it helps you save a little extra money in your pocket month by month.
To keep this thing in mind that FHA refinancing is solely presented to homeowners who are at present using their home as their primary residence.
Smart Mortgage Refinancing
If you want to save subsequent money then refinancing can help you with this. But for availing the complete benefits of it you need to cautiously weigh your personal financial condition and take note of present interest rates. It is vital to make your move at the correct time.
No matter what your requirements are, like for lowering your monthly payments, control to a consistent fixed rate loan, taking benefit of a higher cost loan, or acquiring money out of your investment, refinancing your mortgage is the best and an intelligent financial strategy.
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