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Refinance Home Loan
If you are a current homeowner who purchased a home many years ago, chances are good that the interest rate you are paying is too high. Refinancing a home can be a tremendous savings for many people. If you already own a home but have a high interest rate, you should definitely consider talking to a lender about refinancing. Many of the older loans still reside at 9% or higher! In fact, homes purchased back in the 1980s had interest rates up to 16%! Today, you can refinance for rates anywhere from 5% to 7%. The savings would be incredible and well worth the time. Even refinancing for 2% less than your current rate would save you money on the monthly payment as well as the overall balance.

Start by checking with your mortgage company to see if they offer refinancing. Most do and going with the company you already have is generally the best idea, especially if you have a quality mortgage company where a good relationship has already been established. However, there are always mortgage companies eager to take your business so be sure to check them all out before making a final decision.

To give you an idea of what a reduction in interest would do, if you had a $100,000 house and your monthly mortgage payment was $770 with an interest rate of 8.5%, by reducing your interest rate just 1% to 7.5%, your payment would go down $70 per month. If you spread that out over the life of the loan, and consider the reduction in overall interest, you would be amazed. Now if you reduce the interest even more than 1%, you can see how much you would save and why refinancing is worth it.

The first thing you want to do is look around and do some comparison shopping to see what different lenders are offering for both interest rate and point reduction. From there, convert each of the rates quoted based on a constant number of points. Next, you can take the numbers and start talking directly with some of the lenders. When you go through this conversion process, the best guideline to use is one that equates each point to a 1/4 of 1% change in the new interest rate. That means you would have an 8% loan with zero points, or the equation of 7.75% with one point.

The one thing you do need to keep in mind is that in most cases, when you refinance, you will have to go through another closing, which means you will need money for the closing process just as you did when you first purchased the home. Typically, it is not as much but you do want to determine this when working with the lender. Another important thing is that if your home's value is stable or increasing, a lower interest rate will help build the equity more. If your home's value is decreasing, it may not be a good choice to refinance. Work with a qualified lender to ensure you have all the best options.

 
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