by : Susan Jan

Now that you have purchased your dream home, you are now knee-deep in debt and facing heavy financial pressure. There is one useful solution used by many savvy real estate investors, a solution that involves more cash flow, lowered interest rate and lesser monthly payment. This financial tool, known as mortgage refinance, is not complicated at all, and only involves a bit of calculation and smart leveraging of money.

This may explain why home mortgage refinancing is a popular and lucrative deal. The rule of thumb in refinancing your mortgage is that the interest rate for the new loan should be at least 2 percentage points below the rate of your existing mortgage. In the present economic scenario where the market is saturated with credit institutions and multiple loan products, you are flooded with all types of offers such as the no cost refinance mortgage and the low cost mortgage refinance packages. As a result your new monthly repayment after the mortgage refinancing is considerably lower than the previous one.

However, resorting to mortgage refinancing becomes even more worthwhile and cost-saving if you live at your present home for a certain length of time. If you plan to move out or sell the house soon, then home mortgage refinance may not be a feasible option for you. The longer you stay the more you save month by month in the form of reduced monthly payments. You should only consider refinancing your home mortgage if you plan to own and live in your home for at least three to five years.

If you decide that mortgage refinance is a wise move, then consider the following points:

• These days mortgage refinancing companies are eager to waive off the upfront costs including the application, appraisal and other legal fees. But in return for this very low or almost no upfront refinancing cost, you may have to accept a slightly higher interest rate. But obviously this new mortgage rate is still considerably lower than the interest rate of your previous mortgage.

• Consider the points factor. A point generally amounts to 1% of the total loan amount. Also consider the closing cost or the total amount payable at the end of the specified years. Now if you do not live in the house for at least three to five years there is no logic in paying for those points and closing costs.

• You can gain further by adding the points and closing costs to your new mortgage. This may seem like having to shoulder extra debt, but it actually is not. By keeping the existing mortgage for at least three years, your balance can be cut considerably. As a result, although the closing cost of the new loan is added to your new loan, you will still end up with less debt than with the previous loan. Add to this the benefits of lower interest rate and lower monthly payment and you will soon realize why mortgage refinance has become so popular over recent years.