Home refinancing is usually done when you have a mortgage on your home and apply for a second loan to pay off the first one. Before deciding to refinance your home, you should figure out if the money you save on interest is enough to cover the fees you'll have to pay. In the current economy, this is especially important because it lets you use the equity in your home to pay off your credit card debts and loan payments. The result is a single payment that costs less each month. After all, a mortgage is still the most affordable loan you can get.
It's not as hard to refinance your mortgage as you might think, but in the current market, it may be too late to get a great deal. Interest rates have been low for a long time, and many families have moved because of the promise of cheap money. People have been persuaded to use the equity that has been sitting in their homes through cash-out, bill consolidation, and home improvements, all of which have lower monthly payments. But with a credit crunch on the horizon, many homeowners are, for lack of a better word, tightening their belts because they know that cheap money may not be around for much longer (at least for a while). Still, there are some deals to be had, especially if your situation has changed and you've moved from a high-risk lending category to a lower-risk one (ie into full time employment or a higher paid job).
When or if you should refinance your home depends mostly on your own personal finances. There is no clear rule about when to do it or when not to. There are times when refinancing makes financial sense. To figure out what's best for you, you should take stock of your own financial situation and compare it to your financial goals and objectives. Since interest rates are still going up and the Federal Reserve is making it harder to get credit in general (especially for subprime loans), it doesn't look like the slowdown in the housing market will turn into a rush to buy any time soon. But the usual market forces of supply and demand are still very important. There are still people taking out mortgages, and many homeowners are still looking to refinance.
When it comes to refinancing, there are some good things and some bad things that you need to think about. On the other hand, there may be lower interest rates and fees to refinance. To see if the venture will work in the long run, the two numbers need to be compared. Even so, if you have more than 20% equity in your home, you can get rid of the monthly Private Mortgage Insurance policy you pay for. You can also cash out on your property, getting cash from the equity you've built up in your home as its value has gone up and you've paid off your mortgage. This money can be used to pay off other debts, like store and credit cards, so that you only have to make one monthly payment.
