Mortgage and Refinancing
Mortgage Refinancing If you are currently a homeowner or plan on owning property in the future, the term mortgage should be very familiar to you. It is a lien on a house or property which acts as security or collateral for a loan. The loan amount is repaid over a stipulated time period (mortgaged) and is a widely accepted method for attaining a home/property across the United States. Several types of mortgages are available through various mortgage agencies and banks such as Chase Home Finance, Bank of America, Countrywide, Wells Fargo and Lending Tree.
But consumers must be very careful when choosing whether to go with a fixed-rate mortgage, an adjustable-rate mortgage, balloon-reset mortgage, a rollover mortgage, sub mortgage, interest only mortgage, open-end mortgage, share appreciation mortgage or a reverse mortgage. The variety of mortgages available in the United States seems to comprise an exhaustive list of options, but borrowers usually choose the option that offers the lowest monthly payments over the longest period of time; usually up to thirty years.
In some instances mortgage holders may decide to refinance their mortgage. This means that the borrower has opted to improve on a current mortgage using funds from a new mortgage agreement. In most refinancing situations, the borrower is attempting to reduce their current interest rate and replace it with a new lower rate. Note that the option of refinancing mortgage becomes less attractive if there are very high pre-payment fees attached as well as high closing costs.
In addition to refinancing to take advantage of lower interest rates and lowering monthly payments, property owners also refinance to change mortgage schemes as well as to lengthen repayment terms. Lengthening of terms increases the mortgage period and reduces monthly payments thereby allowing the mortgage holder to retain some well needed funds while taking a longer time to complete payment on the mortgage.
Refinancing has attractive benefits in situations where mortgage owners are faced with adjustable/variable rate mortgages. In many instances where mortgage holders are faced with variable rates they agreed to the arrangement because interest rates may have been very low. If however, the interest rates increase (which it does in most cases), monthly mortgage payments may become a burden.
In this case the benefit of refinancing, would involve switching from a variable rate mortgage to a fixed mortgage thereby allowing the holder of the mortgage to cushion themselves from the effects of fluctuating interest rates in the market.
Refinancing is an option for many property owners especially in times when the economy is doing poorly and interest rates are high. Its benefits include receiving better interest rates, lower monthly payments, and receiving extra cash from cash out option. It is also useful in instances where persons which to switch from a variable rate mortgage to a fixed one. From the number of persons that continue to choose the refinancing option it is clear that the benefits to outweigh the negatives.