How to Refinance Mortgage Loans and Save Money

If you plan to refinance mortgage loans, you are looking at sinking hours into meetings and paperwork, and sinking thousands of dollars into refinancing fees. So how do you save money when you refinance mortgage loans?
* A lower interest rate. Your interest rate is what makes a mortgage expensive; a bad interest rate can cost you more than the loans principal. For instance, if you take out a $100,000 mortgage with a 30 year term at a 7% interest rate, you will pay $139,511 in interest. Thats 139% of the capital. Lowering the interest rate to 5% drops the total interest payments to $93,256, a savings of $46,255. That far outweighs a couple of thousand dollars in refinancing fees.
* A longer loan term. A longer term will raise the total amount you spend, but lower your monthly bills, an important consideration when you are strapped for cash. A $100,000 mortgage with a 7% interest rate and a 15 year term will cost $899 a month, but extending the term to 30 years drops the payments to $665.
* Shortening the loan term. If you are more concerned with the total amount you pay than with the size of your monthly payments, a shorter loan term will save you money. if you have an interest rate of 6.5% and a term of 30 years on a mortgage of $200,000, switching to a 15 year term can drop the total cost of your mortgage from $455,089 to $313,599.
* Changing the type of loan. Switching from an adjustable rate loan to a fixed rate loan when you refinance mortgage loans can lock in a much lower interest rate. This is particularly true in situations like that of July 2009, with low interest rates beginning a long climb back to their previous heights. On the other hand, if interest rates are due to fall, moving from a fixed rate mortgage to an adjustable rate mortgage will let you take advantage of lower interest rates. If you need to significantly lower your monthly payments to get through a temporary crisis, changing to a non amortizing loan, such as a balloon loan, will get you the best results.
If you plan to refinance mortgage loans, youve made a major decision. As with any refinance, mortgage refinances are a stressful process with a large initial outlay. However, if your current mortgage locks you into a high interest rate, high monthly payments, or a high total payment, deciding to refinance mortgages can be an excellent decision.