Mortgage Refinance Interest Rates: Cutting Costs to Alleviate Financial Pressure
When a mortgage becomes difficult to meet, a refinancing loan is a sound solution. But only when the mortgage refinancing interest rates are lower than the original, can it be of any real benefit.
It can be a challenge to secure low interest rates on a refinancing deal when lenders are always seeking to make a profit. However, it is always possible to find a lender that is willing to accommodate the needs of the borrower - in fact, more often than not, it is the existing mortgage provider that is open to the deal.
But there are pros and cons to this kind of deal, and some factors need to be understood before committing to a mortgage refinancing scheme, not least the long-term consequences that it can have.
Why Refinance Your Mortgage?
A mortgage is the biggest single debt a person will ever take on in their lives, but a lot can change during its lifetime. For example, a job can be lost or a new job secured, while income can rise and fall. This creates problems in meeting mortgage repayments, but if mortgage refinance interest rates are low enough, then the pressure can be lifted.
Refinancing a mortgage means tapping into the home equity that a homeowner has. Equity refers to the share of the property value that is not covered by the mortgage, so is technically owned by the borrower. It also means the existing mortgage is paid off, and by securing low interest rates on the refinancing loan, the monthly repayments are lower.
Of course, getting the low interest rate desired is easier said than done, but negotiations with the right lender can lead to the interest rate range needed to make adopting a mortgage refinancing scheme a success.
How Refinancing Works
The basic concept of refinancing is that the balance of the original loan is bought out with a new loan, but at better terms to ensure lower monthly repayments. The key factor in this transaction is the new interest rate, and with relation to mortgage refinance interest rates, these can lead to significant savings.
The reason is that the interest rate needs to be lower than the rate charged on the initial mortgage if any real savings are to be made. If this is not the case, then the exercise fails to alleviate the pressure that existed in the first place. This makes securing low interest rates a paramount concern.
For example, if $150,000 is the balance remaining on a $200,000 mortgage, the equity is $50,000. If $35,000 cash is needed, then through a mortgage refinancing scheme a loan of $185,000 can be secured. The mortgage is paid off, and the extra cash of $35,000 is used to clear debts.
Finding the Right Lender
The best place to begin the search for a refinancing scheme, with mortgage refinance interest rates that are suitably low, is with your existing mortgage provider. There are a few reasons why, not least that they see their mortgage loan repaid in full, and lend another substantial amount too. But, because they already know your credit reputation, securing low interest rates is much more likely.
The Internet should be your next port of call, with a variety of lenders online that offer a range of refinancing loan deals. However, keep in mind that any mortgage refinancing scheme available online may not offer as good terms as your existing lender. Any lender that does, needs to be checked through the Better Business Bureau website to ensure they are trustworthy.
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ABOUT THE AUTHOR
Sarah Dinkins is a financial advisor who has been associated with Guaranteed Bad Credit Loans since long ago. To find Personal Loans, Guaranteed Unsecured Credit Card, and others visit http://www.badcreditfinancialexperts.com