Using Refinancing to Secure Lower Interest Rates
When the time comes to finally buy the house that you've been
dreaming of, you might find that the market isn't right to give
you the interest rate that you want. Of course, it's not always
a good idea to wait and see if rates improve... the home of your
dreams might be sold right under your nose.
If you find yourself having to make payments with an interest
rate that's less than wonderful, there's still hope... by
getting a refinance loan, you can lower your interest rate as
well as lock in lower monthly payments and better loan terms at
the same time.
Below you'll find some basic information about refinancing a
mortgage loan, and how refinancing can be used to secure a lower
interest rate than the original rate on your mortgage.
Defining Refinancing
Before you can begin to consider refinancing as a way to secure
a lower interest rate on your mortgage, it can be helpful to
know exactly what refinancing is and how it works.
At its most simple, refinancing is the process of taking out a
new loan in order to pay off the balance of a previous loan...
the new loan payments and interest rate take the place of the
former, and you now have the new loan term in which to repay the
loan.
This can be very useful for a variety of loans in addition to
mortgages... any loan that you would like to secure a lower
interest rate or better loan terms for can be eligible for
refinance.
How to Refinance a Mortgage
The process for refinancing a mortgage (or any other loan, for
that matter) is actually quite simple... you simply need to
apply for a refinance loan from a bank, finance company, or
other lender, using the equity that you've built up while making
mortgage payments as collateral.
The money that you borrow with your refinance loan will be used
to pay off the mortgage, and you'll begin making payments on the
new loan amount at the new interest rate.
You'll have the new loan's timeframe to repay the debt instead
of that of the original mortgage, though the new term of the
loan will likely be lower than the term that you had for your
original mortgage.
Though the refinance loan is actually a separate loan, it is
often treated more like a renegotiation of the original loan
since it completely replaces the previous debt.
Refinancing for Lower Interest Rates
When refinancing a mortgage or any other loan, it can be of a
great advantage to you if you can lock in a lower interest rate
than the original loan. Even though your monthly payments will
likely be lower than the original loan's payments regardless of
the interest rate that you receive, refinancing with a lower
interest rate can save you quite a bit of money in the long run.
In order to determine if the time is right to refinance your
loan so as to get a lower interest rate, compare the national
interest rates to the rate that you're paying on your current
mortgage loan.
If the national rate is lower than what you're currently paying,
begin shopping around at both local and online loan providers in
search of rate quotes.
The amount that you save on your interest rate may vary from
lender to lender, but any decrease in interest will pay off over
time as you pay off the remainder of the loan balance.
You may freely reprint this article provided the following
author's biography (including the live URL link) remains intact: