Monday, June 8, 2009

Save money on home refinancing

We are stuck at one of the worse recessions and financial meltdowns since the Great Depression, most of us are scratching our heads at how we can react. Although it may seem like all hope is lost in terms of meeting your financial goals, it may not be.



Home refinancing is a powerful financial tool for anyone to use for debt management to investments. If the home refinance is used wisely, and at the right time, the benefits from the refinance can improve the financial picture of the homeowner. Each individual or family has their own unique set of circumstances, therefore the refinance options will vary from individual to individual. refinancing a home-loan is a most common choice.



Just to illustrate how powerful refinancing a home loan can be, if you have a $300k mortgage that is at 6%, and refinance to 5%, you would save over $200 per month on your payment. This will amount to close to $40,000 over the life of your loan. Several useful refinancing tips for home mortgage should be remembered and followed to save money.



A refinance home loan is a new loan obtained from the current or new lender, mortgage companies, or bank to pay off the current home loan. Usually, people will do the refinancing during a lower market interest rate environment to lower the mortgage payments. Either go in for the home refinancing option with a lower rate of interest or you decide on cash out option on the home equity. The third option is to increase the repayment period but this usually results in your paying more money by way of interest. Let's pause for a moment and think about the best option. The interest rates are at the lowest levels in several countries at present. Hence, this is one of the best times to refinance your existing home mortgage.



Even a 25 basis points difference in interest rates could result in several thousand dollars on a home loan spread over several years. If your previous home mortgage is on fixed rate, you should opt for adjustable rate mortgage when you expect the interest rates to decrease which is unlikely at this particularly time. On the other hand, the interest rates are most likely to increase over the next several years, the better option for you is to go in for a fixed rate mortgage for now. This would be particularly applicable if you plan to stay in your present home for several more years.



However, your credit rating must be good if you wish to get the best terms from your refinancing home loans. If your credit rating has slipped from the previous level when you obtained the original home mortgage, then it would be better to wait for a while, maybe weeks, maybe months, and take effective steps to improve your credit rating. Once the credit rating had risen to a satisfactory level, you could plan for a home refinancing. You could also opt for a no cost refinancing home mortgage.



by danny

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