There’s a lot of talk about mortgage refinancing happening right now, thanks to falling interest rates. If you are paying a high rate of interest and are considering mortgage refinancing, it’s a good idea to check what your options are and do your research so you can be sure that you are making an informed choice and not just jumping on the latest bandwagon.
What the New Lower Rates Mean
Even if the new loan you get has a 1-2% lower rate of interest, it can make a huge difference to your monthly budget and help you repay your loan a lot faster. Keep in mind that the rate that is advertised by the mortgage lender is likely only reserved for borrowers who have an excellent credit score. To know exactly how much interest you’ll need to pay, you will have to submit your application form to the lender.
What Is Mortgage Refinancing?
Mortgage refinancing is the process of getting a new home loan to replace your current loan. Essentially, what happens is that your new loan is used to repay the old loan during the refinancing process. Refinancing your mortgage may make sense for a number of reasons, like taking advantage of lower rates, switching mortgage companies, using the money from the refinance to fund a big purchase, and reducing your monthly mortgage payments.
How Does Refinancing Work?
To refinance your mortgage, you will need to shop around for loans and apply for a suitable one – just like what you did when you applied for your original mortgage. Of course, you could get in touch with a lender directly or contact a broker to see what loans you can qualify for.
When Should You Refinance Your Mortgage?
If you aren’t too happy with the terms of your mortgage and if your financial situation and credit score have improved over time, it makes sense to check if you can refinance to a better loan.
You may want to consider refinancing if:
– You have an adjustable-rate mortgage
– The term of your current home loan is longer than 15 years
– You are paying a high rate of interest on your loan
– You have a second mortgage loan that amounts to over half your total income