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Should You Refinance Your Mortgage?

Is A Refinance Right For You?

Think you might benefit from refinancing your mortgage? There are a lot of details to consider and we know all too well how big of a decision these financial issues are. It’s time to clear out the fog and understand where the biggest benefits and pitfalls may be. Below you’ll learn when you should, and when you should not, refinance your mortgage.

http://www.investopedia.com/articles/pf/05/033005.aspRefinancing a mortgage means paying off an existing loan and replacing it with a new one.

There are many common reasons why homeowners refinance:

  1. The opportunity to obtain a lower interest rate; the chance to shorten the term of their mortgage
  2. The desire to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa.
  3. The opportunity to tap a home’s equity in order to finance a large purchase; and the desire to consolidate debt.

Some of these motivations have benefits and pitfalls.

And because refinancing can cost between 3% and 6% of the loan’s principal and – like taking out the original mortgage – requires appraisal, title search and application fees, it’s important for a homeowner to determine whether his or her reason for refinancing offers true benefit.

Securing a Lower Interest Rate

One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb was that it was worth the money to refinance if you could reduce your interest rate by at least 2%.

Today, many lenders say 1% savings is enough of an incentive to refinance.

Reducing your interest rate not only helps you save money, but it increases the rate at which you build equity in your home, and it can decrease the size of your monthly payment.

For example, a 30-year fixed-rate mortgage with an interest rate of 9% on a $100,000 home has a principal and interest payment of $804.62.

That same loan at 6% reduces your payment to $599.55. (To learn more about the home costs, see Mortgages: How Much Can You Afford?, Home-Equity Loans: The Costs and The Home-Equity Loan: What It Is And How It Works.)

-via Investopedia.com

What’s The Difference Between Mortgage Modification And Refinance?

Wondering if you should refinance your mortgage or get a loan modification? Below you’ll learn the difference between the two and which one will help you more based on your own unique situation.

http://www.realtor.com/advice/loan-modification-vs-refinancing/?replytocom=234330…Isn’t loan modification what distressed homeowners used to get through the post-2008 housing crisis?

Well, yes, but it’s more than that. Here’s the lowdown, and whether it’s the right choice for you.

OK, whats the difference?

If you refinance your home, you’re replacing your old mortgage with a new one, whether to take advantage of lower interest rates or to reduce your monthly payment.

This can be done by your current lender or a new one.

You can choose a loan that’s similar to what you currently have—or something completely different. As always, your creditworthiness, equity, and loan type play a role in determining your rate.

When you get a loan modification, on the other hand, you’re tweaking your existing loan from your current lender.

Again, this used to be an option just for people struggling to make their payments—lenders figured that some money is better than no money. But even if you’re not falling behind, you might be able to get a modification in your favor—even reducing interest rates.

Again, this used to be an option just for people struggling to make their payments—lenders figured that some money is better than no money. But even if you’re not falling behind, you might be able to get a modification in your favor—even reducing interest rates.

That’s right, your lender might—might—be able to give you a lower rate for a one-time flat fee.

-via Realtor.com

Do you think either a mortgage modification or full refinance would help your current situation? Which holds more appeal for you?

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