Mortgage Refinancing

Mortgage refinancing is the process of paying off an existing mortgage loan by entering into a new mortgage loan.  Homeowners generally consider refinancing when they believe a new loan will improve their financial situation.

Some common reasons for refinancing may include:

• Lowering your interest rate;
• Lowering your monthly payment, which may also happen if you get a lower interest rate;
• Pulling equity out of your home;
• Shortening the length of your mortgage, which may require a higher monthly payment; or
• Switching from an adjustable rate mortgage to a fixed rate mortgage.

Homeowners should consider numerous factors when looking at refinancing options.  Some things to keep in mind:

• If your current mortgage has a prepayment penalty, you will likely have to pay the penalty in order to refinance.
• Refinancing typically requires closing costs.  Lenders offering no-cost refinancing are often offering higher rates of interest.

The Federal Reserve Board (“FRB”) has published guidance to assist homeowners in making a decision regarding refinancing.  This guide is available at www.federalreserve.gov/pubs/refinancings/default.htm.