Should you refinance your mortgage?

Posted December 23, 2008 by Bernz

The most common reason to refinance a home mortgage is to get a better interest rate and lower your monthly mortgage payments. You also might want to refinance your mortgage if you want to:
a) Convert from an ARM into a fixed rate mortgage or vice versa
b) Receive cash or equity to pay off other debts
c) Extend the life of your loan (i.e. from 15 to 30 years)

mortgage2Here are some common questions and answers that will help you determine if refinancing is a smart financial decision for you.

Q: What are the costs involved in refinancing?
A: Typically you pay an application fee and closing costs. You may also choose to pay discount points if you’d like to buy down the interest rate.

Q: What does it mean to cash-out?
A: If you have enough equity in your property you can refinance your mortgage with a loan amount greater than your current mortgage. The difference in the amount is yours to keep and use as you see fit.

Q: What is a roll-down option?
A: A roll-down option allows you to refinance at no cost. While the rate is somewhat higher, you don’t pay a fee to get your new loan. Tip: If your bank offers this option—it’s a big advantage because as long as our roll-down rate is lower than your existing rate, there is no cost to refinance.

Q: What is roll-in refinancing?
A: Rolling-in your costs is particularly appropriate if you’re planning to sell or refinance again in a few years because it will matter less that the actual loan amount is higher because you will immediately be able to enjoy to the savings.

Q: Do I need to get an appraisal when I refinance?
A: Yes! To learn what it means to have an appraisal and become familiar with other real estate finance terms click here.


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Why you need a mortgage broker and where to find one
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