Monday, November 17, 2008

Lower Monthly Payments - Refinancing Benefit

For many homeowners the possibility of lower monthly payments is a very appealing benefit of re-financing. Many homeowners live paycheck to paycheck and for these homeowners finding an opportunity to increase their savings can be a monumental feat. Homeowners who are able to negotiate lower interest rates when they re-finance their home will likely see the benefit of lower monthly mortgage payments resulting from the decision to re-finance.

Each month homeowners submit a mortgage payment. This payment is typically used to repay a portion of the interest as well as a portion of the principle on the loan. Homeowners who are able to refinance their loan at a lower interest rate may see a decrease in the amount they are paying in both interest and principle. This may be due to the lower interest rate as well as the lower remaining balance. When a home is re-financed, a second mortgage is taken out to repay the first mortgage. If the existing mortgage was already a few years old, it is likely the homeowner already had some equity and had paid off some of the previous principle balance. This enables the homeowner to take out a smaller mortgage when they re-finance their home because they are repaying a smaller debt than the original purchase price of the home.

1 comment:

Sara said...

Home mortgage interest rates are still at an all time low. Thus, this is the right time to refinance a property and take advantage of the low rates available in the market. At present, the market is showing signs of improvement. In such a situation, there is a high chance that the home loan refinancing rates will increase. Once the rates start increasing, it may become difficult to refinance the mortgage to get cash out. So, if you have a stable income, job, and the required credit score, you can easily go for the option of refinancing. So, you shouldn’t waste your time and immediately look out for lenders who can help you in this matter!