Mortgage Refinancing

What is a mortgage loan? Well simply explained it is a loan that one takes to buy a home. One gets a loan from a mortgage company, a bank or a credit union. One agrees on the terms with the lender takes the loan buys the house and starts repaying the loan and the interest in installments and will finish paying over an agreed period of time. What is mortgage refinancing? This question is more difficult to answer. One has taken out a mortgage loan and then after some time is offered a second mortgage loan at a lower interest rate. So one feels that by taking the second mortgage and paying off the first they will be saving money. But it is not that simple getting a mortgage refinance may eventually end up with the borrower paying more. Why do people go for mortgage refinancing? Either they are desperate for cash or they think that they can reduce their installments and save money.

To go for a mortgage refinancing one has to be a financial analyst or someone who is in the mortgage business. There are some loan officers and mortgage brokers who will not give a borrower a refinance. However they are in a minority. Most loan officers and mortgage brokers want to close a mortgage no matter how as they get paid for that. So if the borrower comes out holding the short end of the stick it does not matter to the mortgage broker or loan officer who got him or her the refinancing.

There are a lot of mortgage companies that offer home mortgage refinance loan and lowest refinance mortgage rates. But the question really is does the borrower come out ahead. In most cases the answer is ‘no’. There are countless examples of people who either to get extra cash in a hurry or to reduce installments went with refinancing and ended up paying more. Let’s say that one had taken a fixed rate mortgage of $ 2000,000 at 6% and has a balance of $ 140,000 still on it and goes for a 7 year ARM IO (Interest only) at 5.3.5%.well the installment will go down but at the end of the 7 years the $ 140,000 will still have to be paid.

Finding a second lender for a mortgage refinance is not difficult and most mortgage brokers offer refinance home mortgage loans and that they have the best refinance home mortgage loan rate. But one needs to be careful and try and get the maximum mortgage refinance information that they can and nowadays thanks to the Internet there is a lot of information that is available on the net it is just a matter of studying it carefully and then deciding whether to go for a mortgage refinance.

If one has a mortgage and plans to sell the house and move out then one may go for a mortgage refinance but if one is not planning that then it is better to stay away from a mortgage refinance. A mortgage refinance is going to be a second mortgage and therefore the rates and closing costs may be higher then that of the first mortgage and what one thinks one is saving may just not be there. A mortgage broker who offers a mortgage refinance which has a pre-payment penalty of $ 5000 gives one a second mortgage that covers the $ 5000 penalty and makes one pay an extra $ 3000 has not given any benefit on the mortgage refinance as one now owes more in terms of the extra $ 5000 and has paid an additional $ 3000 so one has not gained but has lost $ 8000 and would be paying interest on the extra $ 5000.

With so many types of mortgages available one can be easily led to believe that they will be saving some money in the long run or the money that they are saving can be better invested somewhere else but very few have the acumen to do it.