Build Home Equity Faster
Many borrowers use a refinance to shorten the term of the mortgage. And brace yourself: Even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build up equity faster and pay far less in total interest over the life of the loan.
Cash Out Refi
Another way to make a refinance work for you is to refinance for more than the balance remaining on your old mortgage -- in effect, tapping your home equity, or 'cashing out,' in mortgage speak.
Trade Your ARM For a Fixed Rate
By switching to a fixed rate loan, you will not only reduce your payment, you will also likely lock in an attractive rate for as long as you own your home.
Mortgage Refinancing Costs
When you refinance your mortgage, you usually pay off your original mortgage and sign a new loan. With a new loan, you again pay most of the same costs you paid to get your original mortgage.
Second Mortgage Loan
Check the market closely to determine the available rates and the costs associated with refinancing. These costs can include items such as an appraisal and other various fees and points.
Low Interest Rates – Pay Points for Lower Rate
In refinancing, a mortgage company usually offers a range of interest rates at different amounts of points. A point equals one percent of the loan amount. For example, three points on a $100,000 mortgage loan would add $3,000 to the refinancing charges.