Lower Mortgage Refinance Rates Can Lead to Financial Salvation
Mortgages create significant debt, and when tough times arrive, meeting repayments can be a killer. But with the right mortgage refinance rates applied, the weight on your shoulders can be lightened considerably.
With the developments in the economy in recent years, thousands of Americans have taken to refinancing home loans in an attempt to ensure they do not lose their homes. The financial pressure caused by job losses or falling revenue has forced them to do so, and by securing low refinancing rates, the situation can be improved greatly.
Thankfully, mortgage providers are very open to the concept of mortgage refinancing, mainly because they know they can profit from it, but also because the most preferable option is for borrowers to afford their repayments, not to default on them. So, how is refinancing a route to financial salvation?
Refinancing Principals Explained
Refinancing a loan is based on the concept of buying out an existing loan to replace it with a new one at improved terms to ensure lower monthly repayments. The result is a more affordable debt, and if the right mortgage refinance rates are secured, the savings made can be significant.
The best way to illustrate the workings is to give an example. Take a $200,000 mortgage on a 30-year term. After 5 years of regular repayments, about $35,000 of the mortgage will have been paid off. Refinancing home loans, therefore, involved securing a loan of $165,000 to clear the balance, but the refinance loan is paid over 30 years too.
Through mortgage refinancing, a smaller loan is repaid over the same term (30 years), with lower interest charged. So, instead of around $560 paid each month, the repayments fall to $460. The $100 monthly savings translates to an impressive $36,000 over the lifetime of the mortgage.
Key Advantages to Refinancing
There are other advantages to refinancing, not just how the low mortgage refinance rates saving money. For a start, the extra cash can be used to deal with other debts, relieving the financial pressure elsewhere. It may take a few months to see the real benefits manifest themselves, but it will happen.
Also, the terms of any future loans are improved too. Since refinancing home loans involves clearing the original mortgage, the credit record of the borrower shows a mortgage marked down as fully paid. So, the credit score improves, ensuring lower interest rates and better loan terms.
With a good mortgage refinancing deal, there are some compromises to make too. For instance, the mortgage is effectively extended in its lifetime, so more interest will be paid than otherwise. Still, that is a small price to pay when the overall financial situation is so well improved.
Where to Find the Best Deal
It is logical that the best terms will lead to the biggest savings. Well, the best terms are usually found online, where comparison sites provide a fast and easy way to sift through the lowest mortgage refinancing rates.
But it is important to read the small print before signing any deal to ensure there are no hidden charges to increase the overall cost. Remember, online lenders who are offering mortgage refinancing need to be checked out too, ideally through the Better Business Bureau website.
But perhaps the first place to check out is what your current mortgage providers are willing to agree to. Negotiating an improved mortgage is something they are open to, since they are getting their money back. This is the prospect that makes refinancing home loans so attractive to them.
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ABOUT THE AUTHOR
Joycelyn Crawford is the author of this article. For more information about Easy Loans for Bad Credit and Bad Credit Home Loans please visit her site http://www.easyloanforyou.com