When a person buys a house and finances it with a mortgage, they get the best deal they can get approved for at the time.
But, what if after a few years circumstances have changed such as lowering of interest rates, or the person’s credit rating improving?
Knowing when it is time to refinance a mortgage and come out ahead is important.
There are at least 4 signs that refinancing a mortgage is the right choice.
Where To Refinance a Home Mortgage
Mortgage lenders are not all equal, some are much better than others. Take the time to investigate mortgage companies and stick to the ones with better reputations such as DollarBack Mortgage. The idea of refinancing a mortgage is to get a lower interest rate, lower monthly payments, pay off a mortgage faster, or to pull money out of a home’s equity for debt payment or renovation projects.
If a mortgage refinance will not accomplish the goal of refinancing, then it is not worth the cost and effort. A good mortgage broker will help a family decide if the time for refinancing is right and get them the most beneficial terms for this project. So, finding the best refinancing company is very important.
4 Signs it’s Time to Refinance Your Mortgage
There are times when a refinance can be a big advantage and others when refinancing will not be an advantage to the homeowner. 4 signs to look for before pursuing a new home mortgage include:
- The homeowner feels they have too high an interest rate on their existing mortgage. If mortgage rates have gone down enough to make monthly mortgage payments smaller and the mortgage gets paid off faster, a refinance might be in order. The decrease in interest rate must be enough to make paying the costs of refinancing worth it.
- Home interest rates are at least in part determined by the borrower’s credit score. So if the credit score has improved substantially since getting the home mortgage, it might be beneficial to refinance the mortgage at a lower interest rate. The homeowner should seek the advice of a trustworthy mortgage broker to see if their credit score has improved enough to make a difference.
- If the homeowner got an ARM or Adjustable Rate Mortgage and it is due to increase the interest rate, it may be time to refinance the mortgage to a fixed-rate mortgage where the interest we’ll stay the same for the whole mortgage period.
- The homeowner has substantial equity in their home and needs to pull money out for a large renovation project or other large expense. The new lower home mortgage interest rates are often lower than a home improvement or other short term loan would be. Where using credit cards could cost around 17% APR, the home refinance interest rate could be under 5% in today’s market. Over time the savings would be substantial.
Make Sure Refinancing Does What You Want It to
Any refinancing of a mortgage has long-term consequences so it is important to use the right mortgage refinancing company and to get the best terms possible. Be sure to check for hidden costs in the new mortgage and closing costs for the refinancing process. If the refinancing costs are substantial, they will eat up any savings a lower interest rate would have given the homeowner.
If those closing costs are rolled into the mortgage, they will make the payments for the whole mortgage term higher. If closing costs become part of the mortgage, they will mean years of additional interest charges. Get the best terms possible for real savings.