Mortgage Refinancing

In many cases, a borrower may wish to refinance an existing mortgage in exchange for a more desirable 
one, allowing the homeowner to trade a high-interest mortgage for a less costly one, or simply to change 
the terms of mortgage.  The homebuyer could actually receive more than 100 percent of the value of their 
home, depending on the amount of equity that they have already paid off. The borrower pays off the 
original loans with the funding from a new loan, for the same property.

A common situation that may precede a refinance opportunity is when a borrower has established a 
mortgage during economic times which caused the original interest rate to be high. Of course, over time, 
the prevailing market interest rates are subject to change, and they often go down. It is when current 
interest rates are at least 2 percentage points below a borrower's original rate that they would benefit 
most from a refinance.

It is suggested to wait until there is a 2 percentage point difference because there are substantial fees 
associated with refinance, and the actual savings might not be realized unless there is a significant 
difference in interest rates.
 
There are an assortment of fees which accompany refinance, and they often equal a cost of several 
percent of the remaining principal.