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Refinance Home Loan and Interest Rates

By Charles Hopkins Published 10/26/2007 | Loans
As time passes by, interest rates became higher and higher.  This gives debtors a headache in repaying their home loans.  The worst can happen if they cannot repay their loan due to high interest rates.  They may lose their dream home and suffer home renting fees or even lose your own dwelling place.  To prevent this from happening, creditors find new ways in decreasing the interest rate.  One of such ways is by refinancing home loan.

The Basics of Refinance Home Loan

Refinance home loan allows the debtor to change his current creditor with another creditor that offers lower interest rate with the same security and asset at hand.  Debtors try to resort to refinance home loan because of several chains of reasons.  First, they want to reduce the interest rate of their home loan so that they can easily repay their debt.  If they can repay their debt, they will have a good credit score.  Having a good credit score will allow them to have future loans with lower interest rates.  With refinance home loan, they will also decrease the amount of tax that they are paying.  Such decrease will also decrease their monthly repayments.  They also extend the period of time of your repayment.  Thus, refinance home loan has many advantages that you can enjoy.

Although there are several advantages of refinance home loans, they have certain risks.  Refinance home loan may incur additional expenses like acceptance and exit transaction fees.  They may also impose penalties on early repayments.  Thus, it can hinder you from finishing your debt as soon as possible.  In considering refinance home mortgage, you must think clearly, seriously and critically.  Think if you really need to refinance your current home loan.  If you can repay your debt with the current interest rate, then stick to it.  But if your current interest rate kills you and the risks of refinance home loan is worth taking, then take it.

Types of Refinance Home Loan

There are two types of refinance home loan in accordance to interest rates.  The first is the fixed interest rate.  In a fixed interest rate, your interest rate does not change for a specified period of time.  This allows you to have a stable repayment of debt each month.  Thus, it eliminates the threat of increasing your interest rate.  But it also eliminates the benefit of lowered interest rate.  The second is the variable interest rate.  It allows you to have a variable interest rate every month, depending on the external factors that affect interest rates (i.e. taxes, etc.).  This type of refinance home loan will give you a threat of increased interest rate every month.  But it can also give you the benefit of lowered ineterst rate per month.

Choosing the right type of refinance home loan is very essential if you want to have a convenient way of repayment.  Choose amongst the two that can give you great convenience in repaying your debt to creditors.  Base your choosing on your status and your monthly income.