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5 reasons to get a new mortgage in 2012

Refinancing to get a better rate
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Refinancing to get a better rate

Low rates can make rate-and-term refinancing a smart financial move. This type of new loan is exactly what the name implies: a refinance in which the interest rate or term is changed, but the loan amount stays the same.

The chief benefit, Lopatin says, is "reducing your monthly overhead, restructuring your loan to obtain a lower payment."

Another benefit might be locking in a fixed interest rate instead of an adjustable rate that can rise if market rates go up.

Homeowners who want to refinance must provide income documentation and have a "decent" credit score, to use Miller's characterization.

Equity is also required for most, though not all, loan refinance programs. This hurdle can be troublesome because homeowners don't control the market value of their property, Lopatin says.

If your loan amount exceeds the value of your home, consider the Home Affordable Refinance Program, or HARP, which is part of the federal government's Making Home Affordable initiative. If your loan is insured by the Federal Housing Administration, or FHA, the FHA Short Refi program might enable you to refinance in a negative equity position.


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