A mortgage is a very technical, very legal document that makes home ownership a possibility for the masses. Knowing how a mortgage works is critical to refinancing.

Mortgage - The Skinny

Its all in the details...

Merriam-Websters dictionary defines mortgage as a "conveyance of or lien against property that is defeated upon payment or performance according to stipulated terms." In other words, that mortgage you take out against your home is an agreement that you will repay your lender as agreed, and if not you loose your home to them - simple as that. But in that very definition you can find a lot about what it means to refinance your home loans, and what you can do to make sure a refinance remains a possibility.

Following the mortgage law

Taking out a mortgage means you agree to the terms set forth by your lender - critical amongst them are the prepayment options and the penalties against such. A prepayment penalty will make your mortgage refinance that much more difficult and that much more expensive - you didn't look closely at your agreement. if you are not careful a lender can make refinancing of your mortgages completely impossible - so be sure you read everything you agree upon and have a lawyer look over the mortgage agreements with you.

From one mortgage to another

This definition also tell you what you are doing with a refinance in a legal sense. Your first home loan belongs to your first lender - they have the rights to your home. Taking out a second mortgage means only putting a second lender on that lien, and since they are in the position of lesser importance they get secondary access to your property in the event of any missed payments and charge higher rates because of it. With a refinance however you are transferring that lien from one lender to another - there is no increased risk, so current mortgage rates generally describe both purchase and refinance rates. You are transferring the lien on your property from one set of stipulated terms to another - make sure you know what those terms are, and make sure you know exactly how much you will save and when.

Finding the best possible deal

A lender will only quote you their asking price - it'll never be their lowest possible price because why would they want to make less money? The only way to be 100% sure that you are getting a bona fide great home financing deal is to seek out multiple mortgage quotes for your specific loan needs. Each mortgage quote will tell you exactly how your lender [plans off providing your loan, including costs, rates, term length, refinancing opportunities, etc. Knowing the details is only the beginning - you have to see how different lenders are working with the details to save you more money.

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