Simply put, a mortgage is a long term loan that's repaid over a period of time. Most mortgages are set on a monthly payment basis, while others are "accelerated" to allow the borrower bi-weekly or weekly payment options.
The interest rate is probably the most important factor in choosing a mortgage. It's important to shop for the lowest interest rate, as a lower rate results in lower monthly payments. If you've already locked into a mortgage with a high rate, you can refinance to take advantage of today's lower interest rates, and decrease your monthly payments.
Mortgages can be fixed or floating. A fixed rate mortgage means that the borrower is obligated to pay the set interest rate for the full mortgage term. In a floating mortgage, on the other hand, the rates and payments will fluctuate higher and lower as the market changes. There are pros and cons to both types of mortgages, and no one plan is the best choice for all borrowers. Many homeowners will use mortgage refinancing as a tool to move from a higher adjustable rate mortgage to a lower fixed rate plan.
The prevailing market rate keeps changing all the time. So it's quite possible that you have already committed to a mortgage with interest higher than the current rate. In this case, you are wise to consider refinancing your mortgage. In mortgage refinancing, the full payment of your current loan is entered into a new mortgage agreement, but at today's lower rate. If rates drop significantly, for example by two percent points, refinancing makes good sense. Check the prevailing rates of interest and compare them to what you're paying now.
Should you choose to refinance your mortgage, there are important factors to consider. If there are only a few years remaining on your mortgage term, it just doesn't make sense to commit to a lengthy new term. Mortgage fees and borrowing costs can also come into play. Some banks and financers will charge fees for closing a mortgage early. There may also be prepayment fees on new mortgages, and closing costs on new agreements. Ask questions of your lender and read fine print before committing to any new mortgage agreement.
When you need extra cash, mortgage refinancing can be a great route to take. If you've built significant home equity, you may be able to access this cash through a home equity loan. The value in your home can be used to generate cash that you need to consolidate debts, pay your child's education, or improve your home. Mortgage refinancing can be a wise decision when faced with a pile of outstanding debt. You'll be making just one payment, and you'll be able to avoid the higher interest charges from private lenders and credit cards. Your budget and your credit rating will be better for it.
If you need cash, are faced with mounting debt or are locked into a lengthy mortgage at a high interest rate, speak with your bank about mortgage refinancing.
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