Category: Mortgages

Essential Tips for Refinancing your Mortgage

If you have decided to refinance your mortgage, there are quite a few different things that you will need to keep in mind. The last thing you want to do is go off half-cocked when it comes to refinancing your mortgage, because you could end up regretting it quite a bit. Anyone who is thinking about refinancing will need to take the following tips into consideration.

Don’t Wait

While it may be tempting to wait to refinance your mortgage until the “right time,” you will just want to do it now. Numerous financial experts say that right now is actually a great time for homeowners to refinance their mortgages, so you will need to take this into consideration for sure. Don’t wait for rates to lower, because it probably isn’t going to happen anytime soon.

Prepare yourself in case rates drop

Make sure that you turn your application to refinance in as soon as possible so that you can take advantage of low rates before they start going up. Another reason to do this is because you will avoid a huge traffic jam of refinance applications if rates suddenly fall. If you want to get your application to refinance your mortgage processed as quickly as possible, you will definitely need to make a point of turning it in right away.

If you are not quite ready to submit your application just yet, you should make an effort to improve and maintain your credit score. Make sure that you have all the necessary financial documents ready to go, and save up some money for the refinancing fees that you will inevitably have to pay.

Make sure you have a decent Credit Score

Something else that you will definitely need to make a point of doing is to get your credit score in good shape before your refinance. You will find that your credit score will play a major role when it comes to the rate you get on a mortgage. Just because rates have gotten lower doesn’t mean that you will qualify for them, so keep that in mind. You should always be making a real effort to improve your credit score as much as possible. The better your credit is, the better your chances will be of qualifying for those low rates.

Use rising home prices to your Advantage

There is no doubt that the value of homes is on the rise right now, so it’s a good opportunity for you to utilize your home’s equity through a cash-out refinance. If you decide to go this route, make sure that you use caution. Make sure that if you choose this cash-out refinancing option that you spend the money on things that are going to build up your credit. The last thing you want to do is waste the proceeds from a cash-out refinance.

Refinance into an ARM

One of the best things that you can do is to refinance into an adjustable-rate mortgage when rates start to rise. These loans usually come with lower initial interest rates than fixed mortgages, so you will want to remember that for sure. They can be particularly useful if you are planning on staying in your home no longer than the amount of the fixed term of the loan. Financial planners definitely seem to agree that this is the right call for a lot of people, so you will need to remember it.

Refinance to a Shorter Term

You will also have the option of refinancing into a shorter-term fixed-rate loan, which can save you money in a number of ways. With this type of loan, the interest rate is going to be lower than with a 30-year fixed-rate loan. The short-term means that you will end up saving more money over the full period of the loan by paying less interest. This is a refinancing option that more and more people have started choosing, and for good reason.

Pay Points

Before your loan finally closes, you will be able to pay points on your mortgage, which essentially means that you are paying money upfront to permanently lower your interest rate. One point will come out to 1% of your loan amount, but you won’t always have the option of paying in full points. The amount of money that you will be required to pay to buy down your rate will depend on the interest rate market as a whole. This can definitely be a good option, but it can be a bit volatile and unpredictable.

There are many different tips and options that you will need to consider when it comes to refinancing your mortgage, and it’s crucial that you keep all of them in mind when going forward. In the end you will be glad you took the time to get this information.