Saturday, May 9, 2009
Mortgage Refinance...know the actual meaning
Is the home mortgage payment your biggest expenditure every month? You might be speculating how to reduce your mortgage payment. Mortgage refinance can give you the answer.
What is Mortgage Refinance?
First of all, you might have a question: what is mortgage refinance? It is the process of obtaining another loan to repay your existing loan. Most of the time, your original home mortgage loan would carry a higher interest rate, therefore it is reasonable for you to secure a new loan at a reduced interest rate. Of course, you would want to save money on your monthly mortgage payments and at the same time, have some additional cash available. Through refinancing, you can lower the monthly payments either by extending the loan term or reducing the interest rate.
In refinancing, you pay off your previous loan with the proceeds of the new loan and the same property is used as collateral. People go for refinancing if the present rates are cheaper than the rates at which they borrowed the loans earlier. People get a very good opportunity to get rid of that huge interest burden and also find a way out to save some money at the end of the day as this process shortens the tenure of the total loan also. This procedure is followed by most people and is also advisable from my end.
Refinancing has some risks factors as well. Fixed-term debts mostly contain penalty clauses like an early payment of the loan for an example. In addition, there are also charges like closing and transaction fees attached with refinancing debt. In addition, some refinanced loans, may result in large interest over the total tenure of the loan the borrower might have face to greater risks than the existing loan because of the type of loan used to refinance the existing debt. Calculating the potentially and other variable costs of the refinanced loan, this important decision should be taken on whether or not to refinance. So, all my readers please do keep this in mind and take your crucial decision