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Mortgage Refinance
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A mortgage refinance occurs when a borrower pays down an existing loan (mortgage) using the proceeds from a new loan. People often seek a mortgage refinance in order to secure a lower interest rate, to lower their monthly payment or to obtain cash out of their accumulated home equity. Another important reason for a mortgage refinance is the ability to change from an adjustable-rate to a fixed-rate. A mortgage refinance is usually worthwhile when the savings in interest outweigh the fees associated with the refinancing. If the reverse occurs, a mortgage refinance may not be beneficial. Prepayment fees attached to an existing loan may cause a mortgage refinance to be less favorable. A mortgage refinance can also cause an extension in the life of a loan and/or increase existing debt. Factors to consider in a mortgage refinance include up-front fees, pre-payment penalties and ongoing variable costs.
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