Mortgage Refinancing Rates

With interest rates on home loans being at an all-time high in many parts of the world, it is not surprising that a lot of homeowners are choosing to refinance. In basic terms, the process of refinancing a mortgage entails finding a new mortgage with more appealing terms and lower interest rates. While refinancing can be beneficial, if the wrong decisions are made it is also possible to lose a great deal of time and money unnecessarily. Conducting the proper research before refinancing a mortgage can mean the difference between losing or gaining thousands of dollars and weeks of frustration. Fortunately, the following paragraphs discuss various reasons to refinance mortgages, how to compare different types of mortgage refinancing rates, and additional expenses that are associated with refinancing a mortgage.

Reasons to Refinance a Mortgage
There are three main reasons to refinance a mortgage – to lower monthly payments, to obtain a lump sum of cash from the property’s equity, and to repay existing debts. Before refinancing, homeowners should consider the various types of mortgages and their benefits in comparison to the current mortgage that they are making payments on. For example, a homeowner that currently has an adjustable-rate mortgage may find it advantageous to switch to a fixed-rate mortgage if market interest rates are going up, as the rates offered on their current mortgage will also rise. For the same reason, an individual with a fixed-rate mortgage may find it beneficial to switch to an adjustable-rate mortgage if interest rates are dropping. Some homeowners refinance their mortgage to repay credit card debts or outstanding loans, while others refinance to obtain a lump sum of cash for a college tuition. Ultimately, the decision to refinance should be based not on the goals of the homeowner, but on whether or not the current market rates and conditions are suitable enough to allow the homeowner to obtain a mortgage that will be less expensive than their current commitment.

Comparing Types of Mortgage Refinancing Rates
There are two main types of mortgage interest rates – adjustable-rate and fixed rates. While it may seem as if fixed rates would be desirable in every situation, there are some scenarios in which an adjustable-rate mortgage would be more beneficial. Fixed rates offer the homeowner the advantage of being certain about the amount that will need to be paid each month during the next 15 to 30 years. However, if market interest rates drop, the homeowner could be stuck with a fixed rate that is higher than those being offered on adjustable-rate mortgages at the time. Thus, when choosing a type of mortgage rate it is important to consider current market conditions; choose adjustable-rate mortgages when market rates are predicted to be favorable, and fixed-rate mortgages when market rates are likely to rise.

Additional Expenses Associated with Refinancing
It is also important to consider the additional costs associated with refinancing a mortgage, such as application fees, title insurance, attorney review fees, loan origination fees, appraisal fees, and prepayment penalties. While some of the aforementioned fees will not be incurred in all situations, application fees (which usually range from $75-$300) are almost guaranteed as they are charged by prospective lenders in order to process loan requests and conduct credit checks. Title insurance is another essential expense, which cover the cost of an insurance policy that covers a predefined amount for any losses caused by inaccurate information on the property title. Title insurance can cost anywhere from $400-$600 depending on the specific closing details of the property purchase. Homeowners may also incur home inspection fees ranging from $175-$350.

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