The mortgage process is stressful and often very confusing. Many loan borrowers figure that once they sign the legal documents, the mortgage is done. Other borrowers know they can refinance and sign a new loan, but do not want to have to go through the mortgage process again. But there are a variety of options that can be executed through refinancing.

            The article, “Is it Time to Refinance Your Mortgage?” posted on quickenloans.com, offers helpful advice to determining when you should or should not refinancing your current loan.

            “There are times when it makes sense to refinance your mortgage. It’s important to have a clear financial objective in mind so that you’re more able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it’s best for you to refinance, based on your individual financial situation.”

There are few reasons to refinance. The first two are the most common; changing from an adjustable rate mortgage (ARM) to a fixed-rate mortgage and vice versa. It's important to know what the current and prospective status of mortgage rates.

“Since mid-2004, the Federal Reserve has raised interest rates several times and is expected to keep raising rates in the near future. This means that if you have an adjustable rate mortgage (ARM), it may adjust to a rate that's higher than a fixed-rate mortgage. Now might be a good time to consider refinancing to a fixed-rate loan [from an ARM].”

An important factor to consider however is the actual amount of time you expect to live at your current residence. If you plan on staying at your residence for only a couple more years, you should stay with yourARM, but if you plan on staying putt for over seven years, you will probably most benefit by refinancing to a fixed-rate mortgage. If you’re going to be in your home longer than seven years, it might be a wise decision to refinance to a fixed-rate mortgage.

On the other hand, if you currently have a fixed rate, and are not going to stay in your home for more than seven years, you should refinance to an ARM because you are wasting money with the fixed.

Use this simple analogy: Long = Fixed; Short = ARM

Most borrowers opting to refinance do so to lower their existing monthly payment. Since interest rates are ever-changing, you may be able to refinance at a lower rate than you originally signed on.

“A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment.”

Another option in lowering your monthly payment is to change you mortgage term.

“For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.”

            These are the basics reasons and ways to refinance your loan. If you are serious about refinancing, you should do more research about the various types of loan refinancing. Many are specially designed to benefit a certain type of borrower. This could mean you.