Thanks to The Digerati Life for this post. If you're considering refinancing, you'll find this information helpful:

Many homeowners who are struggling to keep up with their monthly mortgage payments think of refinancing when interest rates go down. When you question some lenders about refinancing options, you can expect to start receiving e-mails and telephone calls almost everyday.

There are a number of reasons why people resort to refinancing and one of them is to make the most out of reduced interest rates. The borrowers have the opportunity to reduce their monthly mortgage payments if the interest rates go down. If they want to reduce the refinance loan term, they might have to pay higher monthly payments, but they can still save on interest costs. By shortening the loan term, they can pay it off faster.

Before you refinance, you'll need to observe interest rate fluctuations. As rates go down, so do a slew of other rates, such as savings account rates and credit card interest rates. This is actually a good thing for the housing loan market, but you'll need to keep an eye on a moving target. Of course, the goal here is to try to lock in the lowest rate that you come across. You can do this more than a month ahead of closing, which is basically the final step when you refinance. If you’re not able to do so, you can lock in a rate even five days prior to closing.

Like getting your first mortgage, you’d have to apply for a "new loan" to refinance your existing mortgage. If you remain with the same lender, you might save some money and time since there are reduced formalities. Realizing the extent of competition out there, it’s beneficial for your lender to provide you a good offer. Nevertheless, there are a lot of lenders who are eager for your business and you can shop around, not only for reasonable rates, but also to save money on fees. The procedure which involves closing with one lender and starting with another lender, usually generates a range of fees that can frequently accumulate, so get a list of all probable fees. Request a quote that incorporates the correct fees.

If you’re thinking about living in your home for quite a number of years, then it’s better to make the most of low interest rates. Just like when you took out your original loan, you can also buy points that are a type of prepaid interest. If you have additional cash on hand, this might be helpful. Every point is 1% off the overall loan amount. By paying points, you can reduce your interest rates.

You can also go for a cash-out refinancing where you can refinance with an amount that is higher than what is outstanding on your current mortgage; the difference between your new loan and your old loan is the amount of cash you get to keep. This is basically a technique that will allow you to obtain some money as a tax-free loan on the difference between the present home value and its value from the original mortgage. For instance, if your mortgage balance is $100,000 and your current property value is $300,000, you can refinance for $175,000 and keep $75,000 as tax-free money minus the fees and transaction costs. As per Freddie Mac, one of the leading secondary mortgage market players of the country, almost 60% of borrowers who refinance do this for the aim of cashing out.

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