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Home Mortgage Refinancing Guide

Jun 9, 2008
Homeowners who are interested in refinancing their mortgages have a few options to consider. However, before you embark on any refinancing program, it's helpful to equip yourself with some basic knowledge so that you can make the best decision. No single mortgage refinancing plan or program is right for everyone. It helps to find a program that meets your specific needs.

Fixed and Adjustable Interest Rates

For those who prefer to have stability, mortgage refinance loan with fixed interest rate and 15-year term is a good option for them. Many homeowners are comfortable with the 15-year period and they don't have to worry about the rise and fall of general interest rates.

However, other homeowners are more attracted to an adjustable rate mortgage loan. This option can actually cost less in the long run but it's more risky. If the interest rates increase, so does your home mortgage loan rate. Nevertheless, this option can pay off over a long period of time if the interest rates are in your favor.

The difference between the fixed and adjustable rate loans are like the different strategy you use when you're investing your money. There are some people who are risk-averse and prefer to invest their funds in secure bonds and savings accounts. But others are more risk takers and love to invest in the stock market, even though they know that the market can be very volatile at times.

Mortgage Refinancing Costs

Another thing you need to be aware of is that there is a cost in refinancing your mortgage. Besides checking and comparing interest rates from different lenders, make sure you also check the mortgage refinance cost. Do your home works well, as you want to make sure that you can save some money in a long run after your refinancing.

The cost exists because mortgage refinancing loan is also treated as a new loan. The original loan is paid off in full and the lender will prepare a new mortgage loan for you. Therefore, it's subject to the same fees that you have to pay when you arranged for your initial loan.

Another potential hidden cost you need to be aware of is the pre-payment penalty. There are some lenders that charge you a fee if you were to pay off your loan early than expected. So make sure you don't fall for this, check all the terms with your lender carefully to see if such cost exists in your mortgage loan.

In summary, it's not too complicated to understand the mortgage refinance process. You just need to be certain that you do your homeworks by comparing and finding the best interest rates and go through the terms with your lender to iron out all the hidden costs.
About the Author
FREE report is available at: Private Mortgage Insurance. Check out our complete mortgage refinancing resources at Mortgage Refinance Guide .
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