A Well Timed Mortgage Refinance Loan Can Save Thousands


When taking out a mortgage refinance loan, you are essentially paying off your current mortgage with a new mortgage, your home is still the security for that loan and if you time things just right, you could end up saving money by refinancing.
Interest rates are where the bulk of your mortgage payments are spent for the first several years that you are paying for your home. The first few years equity is slow to build, so how to you end up saving money by refinancing? This actually can work several ways. First of all, if you manage to find one of those rare moments when interest rates are lower (most experts advise two points lower minimum) than your current interest rate that moment might be a prime time to refinance. The lower your interest rate, the lower the total payments.

Another way to save money is to refinance the loan with a shorter term. This still equals less payments to interest each month and throughout the life of your loan than a traditional 30-year mortgage. Some people have also found that by taking a shorter repayment term when getting a mortgage refinance loan, they are eligible for a lower interest rate than if they took the full 30 years to repay the loan. So in this situation you are actually getting a double bonus so to speak.

Many people find that they save a significant amount of money on their loans by going from an adjustable rate mortgage to a fixed rate with their mortgage refinance loans. Adjustable rate mortgages tend to offer a lower interest rate at the beginning of your loan in exchange for the ability to raise or lower the rate according to current market standards after a specified amount of time. This for some is called a ‘honeymoon’ and others calls it a ‘grace period’. This still comes down to the fact that the less you pay in interest, the less you pay for your home.

Keep in mind however, that this process does not come without costs. You will have the same fees you paid when originally applying for your mortgage because you are essentially getting a new mortgage refinance loan. There will be up front expenses and fees that must be taken into consideration. Some common fees will be appraisal and inspection fees, loan origination fees, points, and you may have to take out a private mortgage insurance policy once again.

Many people find that mortgage refinance loans do in fact save them a tremendous amount of money over the life of their loans, however, just as many find themselves in financial hot water because they did not handle the process wisely and sacrificed the equity in their homes. Be sure you are either going to benefit from the process of taking out a mortgage refinance loan or seek alternatives. You do not want to recklessly risk your family’s security by making ill-timed financial decisions.