Simply put, a mortgage is a long term loan that's repaid over a period of time. Most mortgages are set on a monthly payment basis, while others are "accelerated" to allow the borrower bi-weekly or weekly payment options.



As with all loans there is an interest rate. A lower interest rate means lower payments, so it's best to shop around for the lowest possible rate. Even if you have "locked in" with a plan at a set rate, it may be possible to refinance your mortgage to take advantage of a lower interest rate.

Mortgages can be fixed or floating. A fixed rate mortgage means that the borrower is obligated to pay the set interest rate for the full mortgage term. In a floating mortgage, on the other hand, the rates and payments will fluctuate higher and lower as the market changes. There are pros and cons to both types of mortgages, and no one plan is the best choice for all borrowers. Many homeowners will use mortgage refinancing as a tool to move from a higher adjustable rate mortgage to a lower fixed rate plan.

Our prevailing market causes mortgage rates to change on a regular basis. You may have already committed to a mortgage at a higher interest than today's rates. If this is the case, you'd be wise to consider mortgage refinancing. If you choose to refinance, the full payment of your current loan is entered into a new mortgage agreement, at today's current rate. If the rates drop dramatically, by two or more points, this is a wise move. Keep an eye on the prevailing interest rates 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.

Mortgage refinancing can be a good way to access extra cash when you need it. If you have built a significant amount of home equity, this cash may be available in the form of a home equity loan. You can use your home's value to generate cash for debt consolidation, home improvements, college funds or other necessities. Refinancing your mortgage can be a wise decision if you have other outstanding debts. Making one monthly payment is not only easier, but it also enables you to avoid higher interest charges from credit cards and private lenders. Your credit rating and your bottom line will both be healthier.

When high interest rates and unpaid debt strain your budget, mortgage refinancing can be an easy solution. You'll pay less interest and save money.