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The process of refinancing your home is very similar to buying a home. This section covers items you might want to consider when refinancing. For a more-comprehensive overview of the home-buying process and your loan options, visit the Buying a Home section of this Web site.
Typically, homeowners refinance to get a lower interest rate, to build equity faster, to switch from one type of mortgage to another, or to draw on the equity in their home. There are a variety of mortgage-loan programs available to help you accomplish these or other goals you may have.
When considering whether or not to refinance, first compare the interest rate of your current mortgage loan to the interest rate of the new loan you're considering (we have several tools and calculators that can help with that). You also should look at how much equity you've built up in your home. You may have an opportunity to take some of that equity out in a "cash-out" refinance, to use for home improvements or other expenses.
Another important item to consider is how long it will take to recover the up-front costs of refinancing. Of course, you should make sure that the new amount of your monthly payment is one that you can comfortably afford, and that your new loan will support or enhance your current financial situation.
In short, you should evaluate your reasons for refinancing your mortgage loan, and choose the type of loan that best meets your needs.
If you've decided that refinancing is right for you, the next step is to evaluate the specific type of mortgage that best suits your needs. As with home-purchase mortgage loans, there are a number of products and financing options available when it comes to refinancing.
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