How to Refinance: The ABCs

By Karen Lawson
Local Lender Columnist

The right mortgage loan for refinancing can help you realize financial goals. Knowing what you want to accomplish through a refinance is important. Save money and avoid unwelcome surprises by researching your loan options and understanding loan terms and lender charges.

Assessing the Big Picture: Know Your Financial Needs

Refinancing can help you consolidate high-interest debt, and may also provide tax benefits. If you took out a mortgage based on a 1% rate to get into your first home, but the upcoming rate adjustment is giving you the jitters, refinancing to a fixed rate mortgage can give you peace of mind. Assessing your financial situation and determining your needs is the first step in knowing how to refinance.

Beware of Excessive Charges and Terms You Don't Understand

If the terms of a refinance seem too good to be true, there's often a reason for that. There may be provisions for interest-only payments or negative amortization involved. These mortgages can be helpful in short-term situations, but may lead to higher payments, erosion of equity, and ultimately, an increase in the amount you owe on your mortgage. If you refinance to an adjustable rate mortgage, make sure you know exactly how and when its terms can change. It's a good idea to shop several lenders before selecting a refinance package.

Compare Refinance Options

It's important to compare loan terms, the costs of financing, and the benefits provided by different refinance options. Being aware of your financial needs now and in the future can help you find refinancing that works well for you.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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