Refinance is a term that refers to taking out a new loan to pay for an old loan. Nothing changes with the old loan. The principle and interest owed don't change. The new loan assumes the old loan with a new principle and interest applied. So instead of owing $100,000 plus interest you now will owe the principle of $100,000 plus interest plus interest. It may be a new bank that looks bigger, the receptionists might be prettier but the fact remains you now will owe more money.

In fact if you signed up for one of those ARM loans because of the free trip to Disney Land you just might be in for a big surprise because of a small trigger built into the loan language that says your loan rate will RE-SET at a future time if the prime rate drops or rises.

For many unprepared homeowners the latter took place and rates are already re-setting. Just look at the increase in Foreclosure notices in the legal section of your Albuquerque Journal Classifieds. Initial interest rates of 4.9% all of a sudden skyrocketed to 8% or even more. A monthly payment of $650 could suddenly jump to $1,300 plus.

When responding to a refinance offer read the fine print. The deal is always in the best interest of the bank. They're in business to make money on loaned money called usury. Usury laws were written by bank lawyers for the banks not for the consumer. When in doubt get a second opinion either from a trusted friend or from another bank. It's a good idea to get a several offers just like buying a car.

Take your time reviewing the terms and conditions and make sure you're doing a refinance for the right reason, perhaps to lower your monthly payment or reduce the rate of interest. If the interest rates are dropping you may save money in the long run if the rate is significantly lower. If you extend your term you will obviously be paying the bank additional money but at a lower monthly rate.

Choose a fixed rate. You might get tempted to opt for an ARM loan but with the economy in such a mess interest rates will probably spike. They always do after a recession. A fixed rate mortgage is the best buy in my opinion.

Most banks offer an accelarated program to make bi-montly payments so in effect you will make 26 payments or 13 montly payments in one year. This will save you several thousands of dollars in interest over the life of your loan.

Something that I am doing now that I wish was available 10 years ago was bill pay through my bank. Set yours up and do it to occur automatically each payment cycle. This will save you the worry and anguish of missing a payment or paying a late fee. This does show up on your credit rating by the way.

The only other piece of advice is find and hire a licensed CPA, that is a Certified Public Accountant to help you manage your financial affairs and keep your taxes up to date.