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  • Refinancing

  • When (And When Not) to Refinance Your Mortgage

    Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance: the opportunity to obtain a lower interest rate; the chance to shorten the term of their mortgage; the desire to convert from an adjustable-rate-mortgage (ARM) to a fixed-rate mortgage, or vice versa; the opportunity to tap a home's equity in order to finance a large purchase; and the desire to consolidate debt. Some of these motivations have benefits and pitfalls. And because refinancing can cost 3% to 6% of the loan's principal and – like taking out the original mortgage –requires appraisaltitle search and application fees, it's important for a homeowner to determine whether his or her reason for refinancing offers a true benefit.

    Securing a Lower Interest Rate

    One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb was that it was worth the money to refinance if you could reduce your interest rate by at least 2%. Today, many lenders say 1% savings is enough of an incentive to refinance.



    Read more: When (And When Not) To Refinance Your Mortgage https://www.investopedia.com/articles/pf/05/033005.asp#ixzz5AsLyfLqx