The Truth about Mortgage Refinancing

Mortgage refinancing is a useful tool for anyone needing to take money out of his or her home for personal use or to get out of a high interest rate mortgage and into one with a low fixed rate.  Mortgage refinancing can be a useful tool, but it's been hyped a lot over the past few years.  It's been hyped so much that people that really don't benefit from mortgage refinancing are clamoring for lenders to do just that.

So, who doesn't benefit from a lower interest rate, or more cash in their pocket?  Well, the answer is everyone would benefit from it, but not everyone can get it. There are several types of people who are not in the financial situation to do a mortgage refinance.  These people include folks who owe more than their homes are worth and those whose credit scores are so low that they wouldn't be able to get the low interest rates that are advertised.

Let's tackle the last one first.  If your credit score is lower than the interest in Michael Moore's last basher flick, then you won't benefit from mortgage refinancing.  Only people with stellar credit scores are able to take advantage of these low interest rates and if you don't have the credit, you'll be stuck with a worse interest rate than the one you're currently dealing with.  Your best option is to pay down your mortgage and accrue more equity in your home.  Paying your mortgage on time will also help you get a better credit score.  Remember, lenders like a reliable payment history; you don't have to pay more than the minimum, though that helps too, but you do have to pay on time, every time.

People who owe more than their homes are worth are considered to "upside down."  This is a bad place to be.  These folks can't do a mortgage refinance, nor can they sell their home without having to pay the difference in what's owed and the selling price out of their own pockets.  The best thing for people in this situation to do is to pay down their mortgage. Paying down the mortgage for several years will help you build equity in your home and reduce the amount you owe versus the market value of your home.  Once you've got the mortgage paid down to a reasonable level, you can thing about mortgage refinancing or selling the house.

Catherine Whaler, from Boston, Massachusetts, was in a situation that needed mortgage refinancing.  After searching through long lists of national lenders, she finally found one she liked; right there in Boston.

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