The Myths and Realities of Home Mortgage Refinancing

Refinancing your home mortgage

Home mortgage refinancing can be financially rewarding, but it isn’t appropriate for every homeowner. Before refinancing your home mortgage, it’s important to understand the benefits of doing so and the myths behind home mortgage refinancing.

The top reasons for refinancing your home mortgage

• Lower monthly mortgage payments - through home mortgage refinancing, you could get a lower-rate home mortgage loan, perhaps a fixed rate loan, an adjustable rate mortgage, or a fixed-ARM combination loan
• Consolidate loans - if you’ve recently bought a home with a 1st and 2nd mortgage, you could refinance your loan in order to combine both loans into one new loan at your home’s current value
• Fixed monthly payments - you currently have an adjustable rate mortgage but want fixed payments in the future by refinancing your home mortgage into a new fixed rate loan
• Home equity loan - you want to refinance your home mortgage to draw cash from your home’s equity for debt consolidation, home improvements, investments, or other purposes
• Pay off your mortgage sooner - you want to build up your equity in your home quicker and pay off your loan sooner by refinancing your home mortgage with an accelerated payment schedule

Home mortgage refinancing myths

Refinancing a home mortgage should be beneficial for the homeowner. Here are the two most common myths regarding home mortgage refinancing that too often keep homeowners from taking advantage of the full benefits of refinancing their home mortgage:

1. I need to own my home for at least twelve months before I can refinance - this absolutely isn’t true! You can refinance your home mortgage loan at any time using either your home’s original purchase price at its value or a new appraised value in many circumstances. This will still permit you to change your loan program and allow for cash out if you require it. Home mortgage refinancing could also eliminate your PMI (Private Mortgage Insurance) requirement, pay off a 2nd mortgage, or to withdraw cash even if you’ve only been in your home for a few months.
2. I should only refinance my home mortgage loan if I can save at least one percent or more on my interest rate - this isn’t true either! If you have a second mortgage, are paying private mortgage insurance, or need to withdraw cash for whatever reason, the interest rate may not be the only determining factor in deciding whether to refinance your home mortgage loan.

Home mortgage refinancing can often save you money and be financially beneficial in the long run. Understanding the benefits of and common myths behind refinancing home mortgage can help you make the right decision for you.