Refinancing Your Mortgage


Whenever mortgage rates drop, you can expect lenders to receive numerous refinancing applications. This is normal and is expected. When we talk about mortgage refinancing, it means a borrower is looking to secure new payment terms in relation to the current mortgage he is trying to pay off. The new terms will ideally have a lower interest rate.

One of the most common reasons homeowners opt to refinance their mortgage is that they want to get hold of more cash so they can cover the mortgage interest. Another is that they want to have payment terms that are more friendly to their current financial situation.


Now let’s try and take a closer look at the benefits and disadvantages of refinancing your mortgage.

The Pros:

  1.    Lower Interest Rate – this is perhaps the biggest advantage you can get from refinancing your mortgage. Sometimes, homeowners find themselves deep in debt. With so many things they need to pay off, a big interest rate becomes too huge to handle. By lowering down the interest rates after a refinancing, they will get the opportunity to pay off a more manageable rate and slowly claw their way back up.
  2.    Convert an ARM to Fixed Rate – next is you can convert adjustable rate mortgages (ARM) into a fixed rate. For example, you can convert an ARM with a fixed rate of 10 years, you can expect the interest rate to remain the same within that time period. Once the 10-year period lapses, that is the time the interest rate shifts. It can go up depending on the benchmark index. If you see yourself staying in your current home or only a few years’ time, then stick to the ARM. If not, you should consider converting the ARM into a fixed rate.

The Cons:

  1.    The Application Process – when applying for a refinancing, you may encounter roadblocks if there were changes on your credit standing or income from the time you applied for your original mortgage. Keep in mind that these two will be the major determining factors if your refinancing bid will be approved or not. Lenders will be stricter and more scrutinizing than ever. Even if you have an existing mortgage, it does not automatically mean that your refinancing is assured. A Newport Beach real estate agent should be able to assist you in the process.
  2.    The Expenses – and then, there are the refinancing costs that come with a new home mortgage loan. These costs range somewhere between 3 percent and 6 percent of your balance. The breakdown of the fees includes the application fee, the credit report fee, the home appraisal, and the loan origination fee. In the market for Newport Beach real estate, contact a trusted real estate agent today.