American Loan Guide

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A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

Refinance Loan

When you are paying a high interest rate on your mortgage, itís time to consider refinancing. This can mean great savings for you and your family. Replacing your existing mortgage with a new, lower interest loan, changing the term of your loan, or even consolidating all your debts into this new loan will save you money, both monthly and over the life of the loan.

Refinancing is one of the best kept secrets around for saving you money, but most people never thought of refinancing. If you are considering refinancing it is a good idea to do a break-even analysis. Will the lower monthly payment as a result of a lower interest rate quickly pay for the cost of refinancing? How many months will you have to stay in the property to break even? Are interest rates low enough now to lock into a fixed mortgage, or would an adjustable rate plan be better? These are some of things you may want to consider when seeking a refinance home loan.

If you decide to apply for refinancing with a particular lender, and if you do not want to let the interest rate "float" until closing, get written statements guaranteeing the interest rate and the number of discount points that you will pay at closing. This binding commitment or "lock-in" ensures that the lender will not raise these costs even if rates increase before you settle on the new loan. You also may consider requesting an agreement where the interest rate can decrease but not increase before closing. If you cannot get the lender to put this information in writing, you may wish to choose one who will.

Most lenders place a limit on the length of time (say, 60 days) they will guarantee the interest rate. You must sign the loan during that time or lose the benefit of that particular rate. Because many people are refinancing their mortgages, there may be a delay in processing the papers. Therefore, you may want to contact your loan officer periodically to check on the progress of your loan approval and to see if additional information is needed.

If you are considering a refinance loan, you will be happy to know that much information is available on the subject and is easy to access on the Internet. You can visit a website and access a mortgage calculator that will tell you approximately what your new monthly payment might be at a lower interest rate or shorter term.

For many people, refinance loans provide a means to escape crippling debt. Refinancing your home, and borrowing against the equity is a good way to consolidate bills into one low interest monthly payment. With so many lenders in the market place, even people with bad credit can get refinanced.

When looking to refinance, it's always best to shop around. Even if you know and trust your current lender, doesn't it make sense to see what else is out there? You may end up saving thousands of dollars.


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