Refinancing your first mortgage has several benefits. Of course, each situation is different. Thus, some homeowners may not benefit from a refinance. The process of refinancing is similar to obtaining the original mortgage. Homeowners receive quotes from various lenders, compare services, and submit an application for pre-approval. Although the refinance process is much quicker, homeowners should be prepared to pay closing costs and other fees.
Lower Interest Rates
There are many reasons to refinance a first mortgage. The major reason is declining interest rates. Within the last five years, the real estate market has experienced record low interest rates. Those who purchased their homes when interest rates were higher took advantage of low rates. Refinancing meant lower rates, thus lower monthly payments. Individual with a past interest rate of 8 or 9 percent received a dramatic reduction in mortgage payments after receiving rates of 5 or 6 percent.
Adjustable vs. Fixed
Another incentive for refinancing a first mortgage is to receive a fixed rate. Although adjustable rate mortgages are popular, these mortgages are very risky. Throughout the duration of a loan, a mortgages interest rate is free to fluctuate depending on market trends. Individuals with a current rate of 5 percent could see a 5 point increase over the next 30 years. Fixed rated are safer because the mortgage rate remains the same. Thus, a homeowner's monthly payment will remain the same.
How to Refinance?
Those considering refinancing their first mortgage have several options. For the most part, homeowners contact their current lenders for information. Because a relationship has been established, some lenders are willing to consider a “no-cost refinance. " In other words, the homeowner is not required to pay high fees, or selected fees are waived. Still, some homeowners prefer to compare rates and services from other lenders. This is a smart move, and ensures that you are receiving the best rate. Mortgage brokers are perfect when trying to find a suitable lender. Brokers work with a variety of lenders and negotiate the best rate. They are successful with finding decent rates for first time homebuyers, refinances, and problem credit.
To view our list of recommended refinance lenders online, visit this page: Recommended Refinance Lenders Online .
Carrie Reeder is the owner of ABC Loan Guide , an informational website about various types of loans.