Many a time, home â€“ owners might take out a mortgage on their property in order to extend the purchasing power they currently have for a number of equally valid reasons. However, certain factors beyond the control of these people who own a home like say the instability of the economy might put a rather severe amount of financial stress on them, leaving them unable to repay their mortgage at the current rates of interest.
Such a condition can also lead to the lending institution raising interest rates in order to protect its own investments, further compounding the problem for home â€“ owners. In such cases, many a time these people might not be able to pay back their mortgage installments in the agreed upon time frame, if at all, further lowering their credit rating to a point wherein they get a bad credit rating, further exacerbating their problems.
However, by refinancing their home loan, people who own a home can make sure that they stay free from such problems. A refinanced mortgage means that the applicant approaches either the same lending institution which lent them the mortgage or another one to refinance the mortgage which means the lending institution which offers this service will pay off the existing mortgage in return for a new one with a lower rate of interest.
Home â€“ owners who wish to apply for a refinanced mortgage will have their case examined by the lending institution again to see whether their current financial situation validates the approval of said refinancing.