There are several reasons as to why you would want to go for the refinance home loan option. In essence refinancing means paying off your existing home loan and replacing it with another which has friendlier terms.
You might choose the refinance option when:
Your current financial state dictates lower interest rates.
You desire a fixed rate mortgage instead of the adjustable rate.
You need to reduce the current mortgage term
You need to use the equity that your home has accumulated to clear other debts, And so forth. These are a few of the common reasons
For whatever of these reasons you need plenty of advice to the effect of understanding whether the refinancing option will really provide you the help you need and not be a dead end search.
Refinancing has its costs, including property appraisal and application fees among others. With the current falling FHA refinancing rates many are going for the Refinance Home Loan option so as benefit from the lesser monthly payments and thus save money in the long term. A difference of as little as 2% will greatly increase the equity a home can accumulate. The falling FHA refinance rates also mean that by choosing to refinance, you can enjoy a shorter term mortgage (pay your home off much faster) which also comes with only a slight rise in the monthly payments. People will always want to refinance into a fixed rate because however low a rate the adjustable rate home loan program may offer, future hikes will cause a great increase in monthly charges. The fixed rate is however effective for homeowners who wish to occupy a house for more than 5 years or so. If however you are planning to move out several months later into the year, the falling ARM rates would be the better option.
The refinance home loan option is also useful where one is looking to gain from the equity his/her home has gained over the years he or she has been servicing the FHA mortgage loan. This together with the option of consolidating any other outstanding debts is a very tricky path which one should tread with care. All these will however lead to the increase in the number of years the refinance borrowers are indebted in mortgage payment. Replacing high interest debts (which are mostly generated from credit card use) with a mortgage with low interest gives temporary relief to some people but if they cannot manage their credit card use well then this could eventually lead to a bankruptcy.
In conclusion, it is only good when we have a reliable source which will guide us in bringing all factors into consideration so as to really assess if the refinance home loan plan will save us money, build more equity quickly, and/or shorten the repayment term.