How to Refinance Your Mortgage

Refinancing the mortgage on your home is a good way to take advantage of lower interest rates and save money. Here is a guide to how to do it.

The first step in refinancing is to figure out whether it is actually worth it. Check interest rates in the real estate section of the Sunday paper, online, and with your mortgage lender. If rates are substantially lower than the rates you are paying, go for it.

Second, you should determine what you want to accomplish by refinancing. Do you just want to take advantage of lower interest rates to lower your payments? Do you want to take advantage of equity on your house to pay off higher-rate debts, such as credit cards? This will influence your decision.

With that in mind, think about what kind of mortgage you want. Fixed rate mortgages are the most popular. With a fixed rate mortgage, you agree at the beginning to pay a constant monthly payment over the life of the mortgage. This way, you are assured that increasing interest rates will not drive your monthly payment up, which certainly does give you some peace of mind. Adjustable rate (or flexible rate) mortgages also are worth considering. With an adjustable rate mortgage, or ARM, you will not be locked into one rate. If you get a raise, or in for some other reason happen to come into some extra cash, you can pay more than your normal monthly payment, thus reducing the amount you will have to pay in interest. If you need to, you will later be able to pay less than your normal payment, effectively reborrowing the overpaid money.

If you are a senior citizen, over sixty, you might consider a lifetime mortgage. With one of these, you will be completely free of monthly payments and free of all fear of repossession. Interest will accumulate on your loan until your death, at which point the money will be recouped.