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REFINANCING

A refinance is nothing more than replacing a current mortgage with a new one. If s pretty simple, but why would someone refinance a mortgage? Did they discover they got a bad loan and want to get out of it? Perhaps, but most refinances occurs when things have changed since the previous mortgage was placed.

Perhaps rates have dropped and you can save money each month. Or maybe you want to pull some cash out of your condo and pay off an automobile loan. A refinance is a good thing for people who originally got a loan when they had lower credit scores that gave them a higher rate, but who since have improved their credit. When they refinance, they get a lower rate.

There are plenty of reasons to refinance, but how do you know when and why you should ever consider refinancing a mortgage? As interest rates begin to drop, you'll begin to see advertisements in newspapers, hear them on the radio, and see them on the Internet trumpeting, “Rates dropped, refinance now!”

Perhaps you got a flyer in the mail from a mortgage company or your bank. However and whatever piques your interest, there are ways to determine whether a refinance is good for you. You shouldn't have to be talked into it by some aggressive loan officer.

A refinance pays off the old note(s) and replaces it with a new one. And it has a neat twist: It allows you to roll all your closing costs into your new mortgage, whereas when you first purchased the property you had to come up with your closing costs with extra funds.

Most refinances allow you to refinance up to 90 percent of the current appraised value of your property. FHA and VA loans will allow you to go up to 100 percent.

Let s look at the various reasons you may want to refinance: drop in rates, changing the term, pulling cash out, refinancing multiple loans, and ARM to fixed rate.

 
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