All about Mortgage Refinancing

All about Mortgage Refinancing

Article by Anirbhan

Mortgage refinancing refers to taking a fresh home mortgage for paying off existing mortgages. By refinancing at a lower rate of interest you can substantially lower your monthly payments and enjoy reduced interest costs. Refinancing is also an excellent opportunity to pay off other debts, reduce periodic payment obligations, or to liquidate equity that has accumulated in real property over the period of tenure ship.

Types of refinancingMortgage refinancing can be broadly divided into two types: no cash-out refinancing and cash-out refinancing. In a no cash-out refinancing, the loan amount is below the mortgage debt currently owed. This type of refinancing allows applicants to borrow up to 95 percent of the appraised value of his home, a certain advantage as it substantially lowers the monthly payments and all related closing costs, and financing costs. Cash-out refinancing, on the other hand, allows borrowers to borrow more than the amount owed on the current mortgage. However, borrowers are generally limited to borrowing no more than 75 to 80 percent of the appraised value of the home when the type of refinance mortgage is cash-out refinancing. The excess proceeds can be used in a number of ways, such as paying off other outstanding loans.You may even opt for an extended period refinancing to further reduce the monthly payments. In fact, extended period refinancing is the in-thing nowadays and a large number of applicants are happily reaping the benefits of substantial savings incurred by extending the mortgage term and utilize the net savings for further paying down the debt.

Tax benefit is also a benefit of refinancing loan. In other words, non-tax deductible debts such as credit card debts can be easily transformed into tax-deductible debts such as home mortgage debts. This substantially lowers tax liability, and helps in putting the owner into a lower tax bracket.

Imagine a situation where you have enough of disposable cash to pay off all existing debts and can simultaneously lower your monthly mortgage payments. This is only possible through mortgage refinancing. Your home is the largest asset you may ever own and it certainly makes great sense to use this asset to your monthly payment and put extra cash in your pocket.

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