Explain Refinancing a Mortgage - Refinancing is As Clear As Mud

In order to explain refinancing a mortgage I will break it down into several simple parts. What is the definition of refinancing, what's the refinance rule of thumb, when is it worth it to refinance and what are some reasons to refinance. You can get much more detailed information later.

Very simply, refinancing is getting a new loan to pay off your current loan. Why would you do this? Because you want to trade up. You refinance because you have done research and found a loan with better terms to fit you than the one you currently have. What are some of the better terms, a lower interest rate, or a stable interest rate, lower monthly payments or a better length of term.

Keep in mind when you refinance you are getting a new loan. You can explain refinancing a mortgage the same as you would a new loan. You will have to go through the same process as you did when you got your first loan. You will need to fill out an application, get together income documentation, submit to a credit check, get an appraisal on the current value of your home and more. Sometimes if you refinance through the same lender, you may not have to do everything all over.

The refinance rule of thumb that many use to determine if it's worth it to refinance is when the new interest rate will be 2% or lower than your current rate. If your current rate has an ARM (adjustable rate mortgage) then you may want to refinance even if the rate isn't 2% lower. Have a professional explain refinancing a mortgage and how all the aspects of it might affect you. Everyone has different situations and needs to consider the process based on their situation.

Besides getting a stable interest rate, people may refinance to take advantage of better terms. If your credit has improved, you may be able to get better terms on your loan which could lower your monthly payments. Make sure you consider prepayment penalties, closing costs and points.

We can explain refinancing a mortgage at Real Estate - Get In The Know. Get In The Know now about refinancing, buying and selling homes, different mortgage types and other real estate information at Real Estate - Get In The Know

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