Refinancing A Mortgage Can Reduce Payments

Refinancing a mortgage can be as challenging and stressful as when you first committed to the home mortgage while reaching for the dream of owning your own home.

Just about anyone who purchases a home is pretty much destined to labor under the weight of mortgage payments for at least 25 to 30 years, which is the life of the most common mortgage loans. Sometimes, the length of a mortgage can be reduced or stretched out even longer depending on the needs of the homeowner and what they are trying to accomplish through their mortgage refinancing.

There are any number of reasons why people are refinancing a mortgage loan. One very common reason is divorce. In many cases one person moves out and the other wants to remain in the home. When this happens it makes a lot of sense to get the mortgage refinanced if possible.

Refinancing a mortgage in a divorce will assure that the house is only in the name of the one staying in the home. It will also serve to pay off the previous mortgage so that the other person is no longer obligated under the terms of the previous home financing arrangements. In many cases, the home refinancing is taken out for a 30 year term to make the payments manageable for the newly single person.

One of the most popular reasons why people choose to refinance home mortgage loans is because there has been a drop in loan rates in the residential financial market. Often a family can end up saving hundreds of dollars every month even if the interest rates have only dropped half a percentage point, depending on the size of the loan. This often makes it an easy financial decision to spend a few thousand dollars on loan fees in order to save that much each month.

Many times the home mortgage lenders offer special incentives to encourage people to refinance their mortgage by waiving the closing costs, appraisal fees and other costs associated with refinancing. In these cases, it is simply a matter of doing the paperwork and then enjoying the lower monthly payments.

People often take advantage of the combination of lower refinance mortgage rates and no closing cost loans to shorten the time period of their mortgage. People who have 20 to 25 years left on their original mortgage can often get a refinance loan with lower interest rates. They take a 15 year mortgage and end up paying about the same monthly payment. This way they can cut many years off the life of the mortgage and will be able to enjoy a home that is free and clear much sooner.

Another reason why people are motivated into refinancing a mortgage is to pay off their other debts. They can accomplish this if they have gained a good amount of equity in their home. When doing their refinancing, they can borrow more than the balance of the original home financing.

When people use part of the proceeds from their refinance home mortgage loan, this is often considered a debt consolidation loan and it is a smart way to manage debts and pay them off sooner. Since the high interest consumer loans are being paid off with a lower interest rate, the payment will go down, or the borrower can pay the same amount they were accustomed to paying and just pay the debt off that much quicker. Another benefit is that the interest on the refinanced mortgage is tax deductible whereas the consumer loan interest is not.

  See the tips for selecting the best fixed rate mortgage here.

  Before refinancing a mortgage, check your credit score with Equifax ScoreWatch™

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