IF you have taken a mortgage loan for your house in the state of Maine a few years ago, you might find it worthwhile to consider a mortgage refinance loan. Interest rates have declined in the wake of recessionary fears in the United States, circa February 2008, and it could just be that a mortgage refinance could save you some money every month. Not that this holds true for all mortgagers in Maine, but there's a chance that it holds for you. This article will help you evaluate if a refinance would be in your favor.
Investing in Maine
To get started, you should know what mortgage refinance is. The mortgage loan you took to buy your house is called 'purchase mortgage'. Refinance mortgage is a new loan you take to pay back in full the purchase mortgage and related charges such as penalty for its premature termination. After closing your purchase mortgage account with the refinance mortgage loan, you continue servicing the refinance loan. The property used as collateral for the refinance mortgage is the same as the one for the purchase mortgage.
Apart from the above, a refinance mortgage loan is the same as a purchase mortgage loan: it's a mortgage loan, anyway. So, the rules and regulations -- including interest rates -- governing refinance mortgage is the same as those for purchase mortgage at a given time.
Benefits of mortgage refinance
These vary from person to person depending on their respective needs. Some want to reduce their monthly payments by taking advantage of lower interest rates. Some want to increase their monthly payments so as to finish off the mortgage liability quickly. Some need instant cash, and opt for refinance package that gets them the cash. Some want to change the type of mortgage they have -- say, from a adjustable rate mortgage to an interest-only mortgage. Some others, foreseeing a good increase in their income by the time their refinance mortgage account ends, might want a balloon mortgage (in which you pay low amounts every month, and a lump sum at the maturity of the loan account). There may be more reasons for one to seek mortgage refinance, but these are the commonest ones in the state of Maine.
Two approaches
Since no one knows your need better than you, it is you who has to figure out how you want to benefit from mortgage refinance. The best way to go about is to use online resources and advice from real-world mortgage lenders or brokers. But, given the competitiveness in the mortgage loan market, you should be sure that the deal you are getting is the best you can get. Therefore, you must talk to more than one lender/broker and compare their advice. You don't need to pay anyone anything in Maine until you have formally accepted an offer from one of them.
Some advisors recommend first contacts with real-world lenders or brokers and then match their offers with results from online resources, such as mortgage calculators available on the websites of most lenders or brokers in the United States. Some of these websites are www.interest.com, www.mortgageloan.com, www.erate.com, and www.bankrate.com, though there are many more on the worldwide web.
Other advisors recommend first use of online calculators to get an independent idea of what could be in store for you, given your credit profile and other factors. Their argument is that once a person is equipped with knowledge obtained from online resources, he can negotiate better with real-world lenders or brokers.
Which approach is valid
The moot point is that you don't depend on any one source for advice, but on different and competitive sources -- both online and terrestrial. Once you have competitive offers in front of you, you know the one that's best for you. Therefore, both the above approaches are valid. The moot points to remember throughout your refinance-seeking process are that 1) low interest rates alone are not sufficient to judge the cost of the refinance loan (since there are upfront costs you have to pay at the refinance loan signing stage), and 2) low monthly payments are not necessarily indicative of a low interest rate (since the interest burden is spread throughout the life of the loan on a reducing balance basis).
Conclusion
While interest rate is the usually the first magnet for most people to consider the mortgage refinance option, it is crucially important to take into account all other costs of the refinance loan, especially the upfront payments you have to make. The real costs of mortgage refinance is therefore best indicated by the annual percentage rate (APR). Also remember that your mortgage interest (doesn't matter if it's a purchase mortgage or a refinance mortgage) and property taxes you pay in Maine are deductible for each year they are paid.
