How to Refinance Mortgages

You may be considering mortgage refinancing in order to take advantage of the recent drop in mortgage rates. When you refinance mortgages, you are paying off the old mortgage and signing a whole new contract for a new loan. The question becomes; should you refinance your mortgage at this time? You should consider the current mortgage interest rates. Typically you should try and find an interest rate that is 2 or more percentage points below your current rate.

Difficulty: Moderate

Instructions

Things You'll Need:

• Home
• Mortgage

1. TYPE
   
   The first thing you need to consider is the type of mortgage you currently hold. If you currently have a mortgage with the following conditions, you may want to consider refinancing.
   
   Fixed Loan with a High Interest Rate
   Adjustable Rate Mortgage
   Two Mortgages (80/20) which could be consolidated into one
   A Long Term Loan that you would like to switch to a Short Term Loan
   Interest Only Loan

2. OPTIONS
   
   After you have looked at your refinance mortgages options, you need to look for the best current interest rates. A website such as Bankrate.com has up to date information on the market and will help you calculate your options. Make sure to check out rate trends. The timing of your refinance is crucial to getting the best rate you can. In many circumstances a 30-year fixed rate mortgage is the best option.

3. CALCULATE
   
   Refinancing a mortgage is not always the best option. Consider your circumstances. Do you plan on staying in your home for a long amount of time? Or, do you plan on moving in the next few years? There are fees associated with refinancing, and it typically takes 3-5 years to recoup the costs of refinancing mortgages. An online mortgage refinance calculator can help you determine whether this is really the best option for you. Find the bankrate.com refinance calculator at http://www.bankrate.com/brm/calc_vml/refi/refi.asp.

4. APPLY
   
   The last step in refinancing mortgages is to apply for the new loan. Most lenders will allow you to proceed (some directly from the bankrate.com website) to an online application process. You can also call local agents to apply.

Tips & Warnings

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Resources

• Refinance Mortgages
• Home Mortgage Loan Fact Sheet