Question:

What is refinance?

Answer:

Borrowers should acquaint themselves about what refinance is. Refinance is the repayment of a mortgage and taking another one to:

  • get better rate and lower payments, especially if you have a subprime mortgage, or a high margin ARM;
  • make a cash-out;
  • avoid foreclosure;
  • consolidate debt;
  • make home improvements;

Knowing what is refinance comes handy when rates drop, or the borrower has other incentives to refinance, such as improved credit, or finances.

Things to Know about a Refinance

If you plan to refinance your mortgage at a certain point, make sure you don't have a prepayment penalty included in your mortgage agreement for longer than you plan on staying in the house.

Before refinancing, make sure you calculate your break even point, so that your refinance is worth it.

Refinancing to a 30-year mortgage gets you back where you started, especially if you tap your equity significantly. Make sure this is what you want with a refinance. However, refinancing with a 30-year loan does reduce mortgage payment significantly, and could be the better shot for troubled borrowers.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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