Philadelphia Refinancing: Shopping for More than Rates

By Karen Lawson
Local Lender Columnist
Oct 19, 2007
It's time to refinance your mortgage. Although many homeowners refinance to reduce their mortgage rates, refinancing can be a useful tool for other situations as well. Depending on how long your plan to keep your home, and your reasons for refinancing, considering factors other than rates alone may assist in meeting your goals.

Teaser Rates and ARMS: Low Interest Rates for Short Term Needs

The media has made much of the consequences of subprime lending practices involving low "teaser" interest rates and upwardly adjusting mortgage rates. Adjustable rate mortgages (ARMs) can help homeowners lower their interest rates and provide cash for short term needs. Let's say that you're in graduate school, and expect to graduate in a couple of years with a professional degree. You'd like to fix up your starter home, as you'll be moving on once your career is established. An ARM loan with a low initial rate could facilitate upgrading your present home and preparing it for sale. It's important to review your current mortgage terms carefully, as some loans may include restrictions on early payoff.

Cash-out Refinancing Provides Ready Cash

If you've owned your home for a few years, chances are you may qualify for cash out refinancing. In addition to the amount needed to pay off your current mortgage, you can borrow an additional amount for various purposes. Home improvement, starting a business, and consolidating high interest consumer debts are all popular reasons for cash-out refinancing. The cash comes from your home equity, so it is important to know how much equity you have as well as market trends in your area. Typically, it's a good idea to keep a cushion of equity to help guard against fluctuations in Philadelphia real estate markets.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.