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Everyone who owns a home knows firsthand the financial obligations involved.  A sizeable portion of your monthly income is delegated to a cover a number of expenses, the largest being the mortgage.

A mortgage is a long-term loan that is repaid over a period of time.  Typically, mortgages are paid monthly, however accelerated plans allow the borrower to choose bi-weekly or even weekly payment options.  A lower interest rate means lower monthly payments, so it makes sense to shop around for the lowest possible rate.  Even if you have already agreed to one plan, it may be possible to refinance your mortgage to take advantage of a lower rate.

There are two basic types of mortgages:  fixed, and floating.  A fixed rate mortgage locks the borrower in to pay one rate for the full term, where a floating arrangement means that the rates, and payments, can be higher or lower.  Both types of mortgages have benefits and downfalls, and your particular situation will determine which plan is best for you.  Homeowners generally use mortgage refinancing as a tool to move from a higher adjustable rate mortgage to a lower fixed rate mortgage. 

The prevailing market rate keeps changing all the time.  So it's quite possible that you have already committed to a mortgage with interest higher than the current rate.  In this case, you are wise to consider refinancing your mortgage.  In mortgage refinancing, the full payment of your current loan is entered into a new mortgage agreement, but at today's lower rate.  If rates drop significantly, for example by two percent points, refinancing makes good sense.  Check the prevailing rates of interest and compare them to what you're paying now. 

Deciding whether or not to refinance your mortgage depends on other factors as well.  Look at the remaining term of your current mortgage.  If there were just a few years remaining, it wouldn't make sense to refinance and commit to another extended payment period.  There are also various costs associated with mortgage refinancing that you need to consider.  Prepayment costs for your current mortgage, closing costs of the new mortgage, and other borrowing fees can come into play.  Some lenders will also charge a fee for closing a mortgage early, so be careful to check the fine print. 

Refinancing your mortgage can also bring extra cash when you need it.  If you have built a significant amount of home equity, you can use mortgage refinancing to obtain a home equity loan.  In this case, you can use your home equity to generate cash.  The proceeds from mortgage refinance can be used for various purposes, like debt consolidation, home improvements, or as a college fund for your children.  Many people wisely use mortgage refinancing to consolidate their debts.  Choosing one monthly payment over many bills is not only easier, but it saves you a lot of money by avoiding higher interest payments from credit cards and private lenders.  Your pocketbook, and your credit rating, will look a lot healthier.

If high interest rates and a stack of bills are straining your budget, consider refinancing your mortgage.  You'll save money by paying less interest.  Talk to your bank or financial advisor to determine the option that's best for you.
 
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