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Homeowners who have a mortgage will often look to refinance their loans at
some point during the process. Rate changes, a desire to tap your home's equity,
and so much more can factor in when opting to refinance.

Naturally, there can be costs involved with loan refinancing that can quickly
cancel out the merits of choosing a new loan. Keep reading and we'll take a look
at loan refinancing and what it can mean for you.

Variable Rate Mortgages: The Approaching Time Bomb

Homeowners who mortgaged their homes in 2001, 2002, or 2003 and selected a
variable rate mortgage are discovering an unpleasant truth: as their mortgages
come up for their first rate adjustment their monthly payments are skyrocketing
by several hundred dollars.

This added cost can be too much for consumers to absorb especially if higher
gas prices are already working against them. Worse, some homeowners in a bid to
stabilize their costs and cut their losses are seeking to refinance their
mortgages to a fixed rate mortgage but have been rejected by their loan
officer.

It could be that the current interest rates have climbed enough to push a new
loan outside of the debt to income ratio requirements of the mortgage company.
In this case, the homeowner is faced with trying to keep up payments for an
already too high mortgage or is facing the prospect of having to sell their home
to avoid foreclosure.

The Equity Pool

Homeowners who have lived in their home for five, ten or more years are
learning that their home's equity has built up rapidly especially in markets
where home prices have been soaring. Ten years into a thirty year fixed rate
mortgage should provide quite a bit of equity for most homeowners.

This money can be used for a home equity loan or a home equity line of credit
to finance home repairs, a new car, education, a vacation, you name it. Rates
are typically very favorable and payments can be quite low especially if spread
out for several years.

Debt Consolidation

Some homeowners refinance their homes when an option to consolidate date is
included. Instead of owing money to several creditors as well as to a mortgage
company a new loan could pay off all of the debts as well as eliminate an
important burden for homeowners.

An especially useful option in a declining  mortgage interest rate environment as overall monthly costs could drop with a favorable loan rate.

Certainly, refinancing makes sense to get out from underneath of a slew of
debt. However, shop for the rates and plans that are most favorable to you and
you can get ahead of the refinancing game.