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Brief Introduction to Mortgage Refinancing

Tuesday, April 29, 2014 - Article by: Lender411 Member

When you refinance, you replace your existing mortgage with a new one. Refinancing is very much like taking out a mortgage; the only difference is how you deduct the points when you file itemized income taxes. When you first take out a mortgage, you can deduct all the points the same year; but when you refinance, you have to divide the points over the term of the loan.

Refinancing requires you to bear closing fees; and although it is a popular thing to do when interest rates go down, when you are thinking about it, first evaluate the expenses you will incur against the savings you are looking to get to ensure you achieve your financial objectives. Having said that, refinancing your home mortgage may be a good alternative when interest rates fall below the rate of your current terms.


  • to reduce borrowing costs: when you replace your existing mortgage with one that offers lower interest rates, you can save money over the life of the loan. As mentioned before, ensure that the savings justify the expenses you will make.
  • to prevent paying higher interest rates: when you have an adjustable rate mortgage, and you believe interest rates will go up in the near future, it may be a wise decision to refinance your ARM into a fixed rate conventional loan
  • to pull cash out of your home equity (cash-out refinancing): when you have equity in your home, either from paying your mortgage, an increase in the market value of your home, or both, you may refinance to take cash out of this equity
  • to build equity much faster: if you have a 30-year term loan, it will take longer to build equity than if you had a 15-year term loan. If you want to build up equity much faster, you may choose to refinance your existing mortgage into a shorter term one. Although you will likely end up with higher monthly payments, a larger portion of these will go towards the principal

Refinancing is like taking out a new mortgage, and you can expect similar applications and closing fees.


  • refinancing application fees
    • credit report
    • home appraisal
  • loan processing fees
  • points
  • document recording fees (citys recorders office)

The life of a mortgage can be long, but in our society, our financial circumstances are likely to change often. Refinancing is then a good resource that can help us adjust our financial commitment to current external or personal financial circumstances. Of course, like everything else, there are no free lunches, and if we want to take advantage of this resource, we must pay some costs. Not as easy to handle as an ATM, but if you have equity in your home, and you are looking to pay for childs college, cash out refinancing may be a good alternative.

Through Fannie Mae, the Government has implemented various refinancing programs that can help struggling borrowers. If you are struggling with your mortgage payments, you can explore the options offerd by these programs here:

Here are some suggestions from the Consumer Financial Protection Bureau if you want to refinance, but your homes value is less than the balance of your mortgage:

Nations Lending Corporation is a licensed in 44 states. As a direct agency lender, our mortgage branch opportunities are a better alternative to any mortgage net branch arrangement. When you work with us, there is no middle man, you get direct pricing and fast underwriting with minimum overlays. We are a better alternative to any net branch arrangement out there. Please visit our website to learn more.

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