loan refinanceA Loan Refinance will remind you of the steps that you went through in obtaining the original loan. That’s because, in reality a loan refinance is simply taking out a new loan. You will experience many of the same steps and the same kinds of costs the second time around. You may be considering refinancing as part of debt consolidation or a student loan consolidation.

Refinancing can be a good idea for homeowners who:

  • want to get out of a high interest rate loan to take advantage of lower rates. This is a good idea only if they intend to stay in the house long enough to make the additional fees worthwhile
  • have an adjustable-rate mortgage (ARM) and would like to convert to a fixed-rate loan and the certainty of knowing exactly each month what their payment will be for the life of the mortgage
  • want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have
  • want to increase their home’s equity more quickly by switching to a loan with a shorter term
  • want to draw on the equity built up in their house to get cash for a major purchase or for their children’s education

Be aware of the costs associated with a mortgage refinance. These costs include penalties for breaking out of your current loan, origination fees, credit reports and legal fees, and if required, private mortgage insurance and extra life insurance premiums.

Financial contracts can be very confusing. Before signing yourself to a major, long-term loan refinance commitment have an attorney, familiar with financing and taxes, examine and explain the details (where the Devil is). A good tax finance attorney can save you many times his fee over the years, not to mention possible legal problems.

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