Financing and Refinancing a Home 

There are many options available for financing the purchase of a home, and in many ways, it's never been easier to invest in real estate.  But scams and "too good to be true" schemes do abound, so it's important to get your facts straight before jumping into a long-term financing arrangement.  This article will investigate the different types of financing and refinancing options that exist for homeowners and new buyers. 

The most well-known type of financing for a home is a mortgage.  A mortgage is a kind of loan that is paid back in a series of monthly payments or installments.  The house or property being purchased is what secures the loan, and the mortgage is the agreement through which the borrower commits to repaying the loan.  There are an innumerable amount of mortgages existing in the market today, so it's crucial to do your homework when investigating which type is right for you and which will ensure you the best deal.  Two of the most common types of mortgages are fixed-rate mortgages and adjustable-rate mortgages.  Fixed-rate mortgages are most commonly used by first-time home-buyers.  This type secures a stable — or "fixed" — monthly mortgage payment for the entire term of the loan.  With this kind of mortgage, you will be able to plan your monthly budget accordingly with ease and predictability throughout the duration of repayment.  The second type of mortgage, adjustable-rate, does not ensure the borrower a predictable monthly rate.  Instead, the interest rate on the loan can fluctuate over time.  These kinds of mortgages are popular, however, because they typically start out with lower interest rates and monthly payments. 

If you've been a homeowner and mortgage-payer for many years, however, you may be considering refinancing your home.  The purpose of refinancing a home is, generally speaking, to secure a lower interest rate on the mortgage that you are paying.  One old adage in the real estate business states that a homeowner shouldn't go through refinancing unless he or she can get at least a 2-point lower interest rate.  But more and more, real estate experts are advising homeowners to consider other factors when deciding whether to refinance their homes.  For instance, one of the deciding factors should be how long it will take you to "break even" with the refinancing and if you are willing to remain in the property for that length of time.  In other words, will the cost of refinancing make sense for you financially in the long run?  Experts also advise taking the following factors into consideration and coming up with estimates for each of these — your new rate after refinancing, your new monthly payment amount, your adjusted monthly savings, and the number of months it will take you to break even once you've refinanced.  Devising some estimates for these factors will give you a clear picture for what the benefits of refinancing may be for you.  Over the long-term, if the savings you will accumulate outweigh the expenses you'll incur in the beginning of the refinancing process, then it's likely a viable option for you. 

One of the most important steps in securing the financing for a home is to do your research.  Investigate all of your options, especially if you're a first-time home-buyer.  Oftentimes, a "too good to be true" mortgage deal is exactly that.  Seek out many estimates on mortgages before settling on one.  And if you're considering refinancing your existing mortgage, make sure you calculate estimates for how much the refinancing will cost (and/or save) for you in the long run.  Knowledge is power, and in the currently volatile real estate market, it pays to have all the facts.