refinancing florida homesRefinancing will remind you of what you went through in obtaining the original loan. That’s because, in reality, refinancing is simply taking out a new loan. You will encounter many of the same procedures-and the same types of costs-the second time around.

Costs can run up to 2% of your loan amount. Depending on your standing with your mortgage lender, these costs are negotiable. A good credit score and a lower loan to value ratio will increase your bargaining position with the mortgage banker. As long as the interest savings from a lower borrowing rate outweighs the costs, refinancing will be to your financial advantage.

Home loan refinancing may require that you pay an average of 3% to 6% of the outstanding principal in refinancing costs. A home loan refinance may incur prepayment penalties and the costs of paying off any 2nd mortgages that may exist. Most sources say that it takes at least 3 years to realize fully the savings from a lower interest rate, given the costs of the refinancing. Depending on your particular circumstances and the loan amount, you may find that refinancing a loan that is only 1.5 percentage points higher than the current rate could recover the refinancing costs in a shorter time.

Refinancing can be a good idea for homeowners who:
* would like to get out from under a high interest rate loan and take advantage of lower rates. This is advantageous only if you intend to remain in the house long enough to make the added fees worthwhile.
* are making payments on an adjustable-rate mortgage (ARM) buy would prefer a fixed-rate loan with the certainty of knowing exactly what the loan payment will be for the life of the mortgage.
* want to switch to an ARM with more protective features (such as payment caps) or a lower interest rate than the ARM they presently have.
* would like to build up equity in their home more quickly by switching to a loan with a shorter term.
* need to draw on the equity built up in their home to get cash for an emergency, their children’s education or for a major purchase.

A benefit to mortgage refinancing is a lower interest rate and a possible shortening of the home loan term. By obtaining lower interest rates, you will be lowering your mortgage payments. In some situations where the mortgage payment reduces vastly, home owners are able to reduce their loan term at the same time, keeping their mortgage payments very reasonable. By lowering the monthly principal and interest payment, you are in a situation to add the savings to your payment, which goes directly to principal.

Mortgages are fully amortized which means that payments are both interest and principal. Any payment that is extra from the minimum amount due, goes directly into principal, which will help you pay the loan off faster and save you thousands of dollars in interest.

Financial contracts can be very confusing. Before signing yourself to a major long term commitment have an attorney, familiar with refinancing 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.

Back to the top of Refinancing.