Refinancing your home mortgage can provide great benefits and you (the home owner) should carefully review all of your options before considering a home loan refinance. An FHA or Conventional refinance can provide a lower interest rate, lower monthly mortgage payments and the ability to take cash out from your homes equity but there are many additional factors to consider before refinancing your mortgage.

Reasons why people refinance:

• To get a lower interest rate: FHA and conventional rates have dropped dramatically over the last few years to around 5.00% and many home owners are able to save hundreds of dollars per month on their mortgage payments.
• Consolidate debt: FHA loans allow you to refinance your home up to 85% if you are consolidating debt into your mortgage. People usually roll their high interest credit card and other revolving debt into their mortgage payment to reduce the overall interest rate they have to pay and to lower their overall monthly expenses.
• Take cash out:Your homes equity can be viewed as liquid cash sitting in an account. Although this money (your equity) is not as easily accessible as your checking or savings, one can refinance their homes with and FHA or conventional loan to extract some of this money and put it to better use. People usually refinance to take out cash from their equity and use it to pay off debt, take a vacation, buy a car, or simply keep cash on hand.
• Reduce your term:You can refinance your home if you want to pay off your loan in a shorter amount of time. Most mortgages in the U.S. are based over a 30 year term and some people refinance their homes to reduce this amount of time to 20 or 15 years. By reducing the amount of years you have to pay off your loan, you will incur less interest over the life of the loan and pay off your loan quicker; Your monthly payment may be slightly higher because you are shortening the total amount of time you have to pay off a specified amount of money.

Things to consider before you refinance:

• As a rule of thumb, if you are refinancing solely to reduce your monthly interest rate, you should be lowering your rate by at least 1 full percentage point - example: 6.5% to 5.5%
• Are you getting a good rate? FHA mortgage rates are around 5.00% right now and shopping around with a few different lenders can ensure that you get the best deal available to you.
• Taking cash out? Be wise, don't use your homes equity to buy frivolous items. This money may be your life's investment and should be applied to the benefit of your overall financial success. If you refinance to extract equity, use it for paying off high interest debt, education or another lucrative investment.
• Make sure your closing costs are reasonable. It can not hurt to get a few preliminary quotes from lenders and a good faith estimate that will provide you with an estimated breakdown of the charges and costs associated with a possible FHA or Conventional refinance.

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