5 major reasons to why mortgage refinance - By: Ray Right

Why refinance a mortgage?

There are several reasons why a borrower should refinance mortgage. These are 5 major reasons to why mortgage refinance. Maybe interest rates have fallen as a result of the global crisis, lack of liquidity in the financial system coupled with the high rate of foreclosures? Could it be that the economic outlook points to a rise in interest rates?, Or perhaps, does your credit score has improved enough to be eligible for a new mortgage at a lower interest rate? Or simply would like to change to a different type of mortgage as he feels that the financial institution that holds the mortgage does not provide the desired service.

• Reduce the interest rate:

The interest rate on your mortgage is tied directly to how much you pay for your mortgage each month. Lower interest rates usually mean lower payments. You may get a lower interest rate due to changes in market conditions or because their improved financial credit. A lower interest rate also would create equity in your property faster.

For example, compare the monthly payments for principal and interest of a 30-year loan with a fixed rate of 5.5% and 6% for a total of $ 200,000
6% monthly payment $ 1,199
5.5% monthly payment to $ 1,136
The difference each month is $ 63
In one year the difference is $ 756
In 10 years you will have saved $ 7,560

• Adjust the term of your mortgage

A. Increase the term of your mortgage

You may want a mortgage with a term greater than allowed to reduce the monthly payment amount. However, this would also increase the term of the loan payments and the total amount of interest you end up paying.

B. Reduce the term of your mortgage

Short-term mortgages, for example a 15-year mortgage instead of 30, generally have lower interest rates. Also, if you pay your loan earlier than agreed, you can reduce your costs even more. In return, your monthly payments tend to be higher because they would be paying more principal each month.

• Changing a mortgage variable interest rate mortgage to a fixed interest rate

If you have a variable rate mortgage, or ARM (Adjustable Rate Mortgage) for its acronym in English, your monthly payments will vary by changing interest rates. With this type of mortgage your payments may increase or decrease.

In the future you might find in a somewhat difficult situation if your payments go up. In this case it would be advisable to consider a change to the type of fixed rate mortgage in order to achieve peace of mind to know in advance the monthly payment to make with a fixed interest rate. If interest rates will increase in the future, could also opt for a fixed rate mortgage.

• Getting a better variable rate with better terms and deadlines\

If you have a variable rate loan, does the following adjustment in the interest rate would increase your monthly payments substantially? If so, you may choose to refinance and get another adjustable rate mortgage with better terms and deadlines. For example, the new mortgage would start with a lower interest rate, would offer small adjustments to the interest rate or payment limit would allow a lesser extent, implying that the interest rate could not exceed a certain amount.

• Getting cash from the equity built in your home

The Fair Housing is the monetary value of the difference between the balance you once had on your mortgage and property value. When refinancing for a higher amount due on a home, you may receive the difference in a cash payment, also called cash out refinance cash-out refinancing or English. You can choose to do this if, for example, needs cash to make home improvements or pay for the education of their children.

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