Home Refinancing When Should you Refinance Your Home Loan  by The Let Your Mortgage Make You Rich! Team

Home loan refinancing replaces your existing loan, usually with a new loan of a lower interest rate covering the same amount of principal. Refinancing can reduce your interest rate, alter the terms of the loan, or combine or consolidate your debts.

While home loan refinancing can be useful for some, keep in mind that it is not always financially sensible. As a rule, refinancing is not beneficial unless the new interest rate is at least 2 percentage points lower than your existing loan.

Reasons for Home Loan Refinancing

1. To reduce your monthly payments by switching to a lower interest rate.

2. To consolidate debt.

3. To reduce the term of your loan (the payoff period).

4. To draw on the equity accumulation to get money to use for other things.

5. To convert an adjustable-rate mortgage to a fixed-rate loan.

Home Loan Refinancing may be Sensible if:

1. Rates drop. Typically, when rates fall one percent or more, home loan refinancing will save you a lot of money; refinancing can lessen your monthly payment, and in other cases, may even waive your mortgage insurance.

2. You want or need extra money. <em>Home loan refinancing</em> can reduce your monthly payments, and release some equity for use of other things. When you need additional cash, wherein straight refinance is just not reasonable, you can choose to have a home equity loan, where you can borrow against your home's equity.

3. You would like to consolidate your debts. When you attain equity in your house, you may consolidate all your loans and debts into just one payment through home loan refinancing. Normally, your total monthly payment may even be decreased; on top of it all, the interest on your mortgage (now including consolidated non-mortgage debt) is tax deductible.

4. You plan to stay in your home for a long period of time. The longer that you plan to remain in your house, the more advantageous it is to refinance to a lower interest rate.

5. You would like to decrease your mortgage term. Home loan refinancing for example from a 30 year loan down to a 15 year loan, can help settle your mortgage faster. Even though your monthly bill will be bigger, you can save thousands, or tens of thousands, on the entire interest.

Home Loan Refinancing may Not be Sensible if:

1. Your interest rate should drop. Typically, refinancing should cost roughly from 1.5% up to 2 % of the amount of your home loan. So to be reasonable and equitable, your interest rate should be improved by about 1%.

2. To eliminate mortgage insurance. Mortgage insurance can be lessened through refinancing; but if rates did not drop sufficiently to bring about these benefits, there can be other means to drop or lessen the insurance.

3. You want to remove a debtor from the home's title. This is done by having the borrower fill out a "Quit Claim" Deed. The process is simple and can be more worthwhile than home loan refinancing.

About the Author

The Let Your Mortgage Make You Rich! team is comprised of individuals who are fed up with the secrecy in U.S. banking and lending that works to the advantage of only the bankers and lenders. These representatives are fed up, have had enough, and are disseminating radical information to put financial power back into the hands of the people of the United States.