If you're considering whether or not to refinance your mortgage
loan, you may find that the decision that you make will
influence your finances for years to come. Refinancing can be a
powerful tool to save money and receive better interest rates
and loan terms, but if you enter into a refinance loan without
taking the time to consider the options and potential
ramifications then you might end up spending more on the
refinance than you would have on the original mortgage loan.
To help you in making this important decision you'll find below
a listing of several factors that should be considered before
making your final choice.
The information provided will hopefully assist you in making the
decision that's right for you and your current situation.
Mortgage Payments and Equity
The first thing that you should take into consideration when
thinking about refinancing a loan is the amount that you have
thus far paid against your original mortgage. Any potential
refinance lender will look at how long you've been making
mortgage payments and how much equity you've managed to build up
in your home.
Since you'll be borrowing the amount remaining on the original
mortgage and once again using your home as collateral, the more
of your original debt you've managed to repay then the more
likely you are to receive a good offer for a refinance loan...
as a general rule, you should have already been making payments
for at least one or two years. Some cases may come along where
it's too good of a deal to pass up, of course.
Evaluating the Market
Once you've taken the time to consider whether or not you've
made enough payments on your original mortgage loan to
refinance, you should begin looking at the lending market to
determine whether or not it would be worth it to get a new loan.
The loan market and interest rates may have decreased since your
original mortgage loan... but they may have increased instead,
depending upon how the economy has been doing in the time since
you received your first mortgage. Investigate lending rates and
the market at large to avoid applying for a refinance loan only
to end up with a higher interest rate than the one that you
Determining Potential Savings
Once you've done some of your preliminary research, it's time to
determine how much you might stand to save by refinancing. Using
either a compound interest formula or an online mortgage payment
calculator, determine what the monthly payment would likely be
at current interest rates for the amount that you need to
borrow. You're looking for a significant savings from your
current payments, since it likely wouldn't be worth the trouble
and the additional fees that may be involved to simply save a
little bit from what you're currently having to pay.
If it looks like you might be able to save quite a bit by
refinancing in the current market, however, then it's time to
start looking for a lender so as to take advantage of the
Finding a Refinance Lender
It's important to remember that a variety of different lenders
exist, and that each is likely to offer you a different interest
rate. Take the time to shop around at various banks, mortgage
companies, and online lenders, requesting quotes and comparing
loan offers in the same manner that you would any loan.
Find the loan that serves you best, so that you can get the most
out of your refinancing experience.
You may freely reprint this article provided the following
author's biography (including the live URL link) remains intact:
About the author:
John Mussi is the founder of Direct Online Loans who help
homeowners find the best available loans via the www.directonlineloans.