Refinancing refers to a home owner acquiring a new mortgage to replace the original mortgage on the house. It is mostly done by home owners for them to get better interest rates and terms. The first loan is paid off and creating room to take out a second loan, rather than throwing out the original one. For those home owners who have a good credit history, refinancing can provide a perfect platform to convert the mortgage from a variable mortgage to a fixed mortgage, thereby acquiring a lower rate. For home owners who have a bad credit score or have too much debt, refinancing can be rather risky for them.
Regardless of the economic climate that you are in, it can prove to be rather difficult to make regular and disciplined payments on the mortgage – between the high rates and the unstable economy. In the event that you find yourself in such a situation, you should consider refinancing. However, you should note that the danger with refinancing lies in not having the required information – ignorance. Without the proper knowledge, refinancing can actually work against you by increasing the refinancing home mortgage interest rate rather than reduce it. Having the basic knowledge will work wonders for you and help you achieve your goals and get the best deal.
When should you refinance your home?
Many lenders and banks will require the homeowner to have their original mortgage serviced for 12 months at the very least before they can provide refinance services. The different lenders however have different terms attached to it. It is therefore in your best interest that you read through their details as well as restrictions and be familiar with them.
It is recommended, though not a must that a home owner refinances with the original lender. You should however have in mind, when you are choosing the lender that it is easier to maintain a customer than it is to make a new one, as such, most of the lenders will not require you to provide them with property appraisals or new title searches. Most will also provide you with a better price.
Put simply, your chances of getting a better rate are higher if you choose to stick with the original mortgage provider/lender.