Home Mortgage Refinancing

Home Refinancing is basically taking a new mortgage to replace an old high interest rate mortgage. There are two major types of mortgage loans; Fixed interest rate and adjustable rate mortgages. The rise in mortgage rates is a "wake-up call" for lenders getting most of their business from refinancing, says David Kittle, the president of Jefferson Mortgage Group of Louisville. If the current interest rate on your mortgage is 2% higher than the present market rate then, refinancing will be the best option. Some homeowners may want to shift fixed interest mortgage rate in to adjustable rate mortgage or ARM to fixed mortgage, cash-out mortgage refinance to liquidate equity for home remodeling, credit-card debt elimination and debt consolidation. For them refinancing will be the best solution. Consult your mortgage lender before refinancing.

Cost of Refinancing

Application Fee($100-$300)

Survey Costs ($120-$300)

Appraisal Fee and points ($160-$300 & 1-3% points)

Lender's Attorney's Review Fees ($100-$200)

Title Insurance ($500-$600)

Home Inspection Fees($200-$300)

Mortgage Insurance (0.5-1%)

Prepayment Penalty - depends on lender.

In conclusion, a homeowner should plan on paying an average of 4 - 6 % of the principal in refinancing costs, plus any prepayment penalties and the costs of paying off any second mortgages that may exist. Choosing refinance a home mortgage is a decision that involves a careful balancing of costs and benefits. According to Matthew King II, president of MK Capital Resources L.L.C. in New York City "If you plan to stay in the house seven years or longer, it would be worth it to refinance to a 30- or 15-year fixed mortgage rate at 6.5% with 0 points. You could even get a lower payment if you added points."

Even if the payments on a fixed mortgage rate are higher than what you're paying now, King says it would be better to lock-in a fixed rate while interest rates are low rather than possibly paying a higher rate after the seven-year period of the adjustable mortgage rate has expired.