Help With Home Refinance


by Sean A. Kelly - Date: 2010-10-23 - Word Count: 672 Share This!

Home refinance is one of the many options that Americans may opt for in order to reduce their monthly payment. Basically home owners may apply for a second loan to help pay for the first one but at a lower interest rate and often extending the life of the loan. Sometimes known as a second mortgage, it has become somewhat of a norm for Americans. It is essential to know that although home refinance does have the potential to help reduce monthly expenses it is not necessarily a suitable strategy for every situation of financial distress. A little bit of research and understanding of the nature of home refinancing may help you have a clearer picture on what home refinancing is all about.

One question that you might want to ask yourself before going ahead with refinancing is "Should I refinance or shouldn't I?" Of course the rule of thumb is that if you could reduce your interest rate by at least 2%, refinancing your home might not be such a bad thing after all. But that should not be the only guideline for you to base your decisions upon. It may be wise for you to figure out how long it will take you to break even and if you are going to still be staying in your home during the entire break even period. Basically you might want to keep staying in your home while you use your overall savings to compensate for the cost of refinancing.

Another question that you might want to ask yourself is "To whom do I go to ask for help with my refinance?" The most logical answer might be to go back to the same lender from whom you got your first loan to buy your home. This is because they are more likely to grant you a relatively lower interest rate especially if you have been a good paymaster since the beginning of your loan term. Trying to get a new client is expensive and involves a lot more work than retaining existing clients and maintaining their business. You might also have a better chance of negotiating with your lender to exclude other fees and charges such as closing costs or purchasing points if you have maintained a credit score of higher than 600 during the entire term of your loan.

You might also need to ask yourself "How do I choose the right home refinance program?" Just like choosing your first mortgage program, you might need to take careful consideration of all aspects and other variables before deciding on one particular program. You might not necessarily have to go back to your original lender but you do have the freedom to venture out to a new lender if they are offering a better deal than your current lender. However, it might be wise for you not to base your decision solely on the annual percentage rate (APR). Other variables might need to be considered as well such as the term of the loan - whether you wish to extend or reduce the term of your loan; the interest rate - especially if you are opting for an adjustable rate mortgage; or purchasing points - a certain amount of fees you pay your creditors to get the lower interest rate.

You may also like to ask yourself "Is this the right time for me to refinance my home?" Of course there are guidelines which you may refer to base your decisions upon. However it may always be wise to consider home refinancing if you can be sure that the long term savings outweigh the initial expenses. Most experts would advise against home refinancing should you plan to move out to a new home not long after applying for a refinance.

In short, home refinancing may seem like the most logical way to reduce your monthly expenses but if it only benefits you for a short term instead of long term, you might want to rethink it and figure out alternative ways for you to achieve your goal of reducing your expenses.


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