Making the choice to refinance based solely because interest rates are low is a decision that needs to be factored by more than just a rate, it needs to provide a benefit. In fact, People often make poor decisions because of this reason. A mortgage refinance can be a benefit if you intend to stay in your home for the long term or if it can significantly reduce the interest rate.
However, if you have already decided on getting a refinance loan, then be sure that you follow some simple steps to ensure the best outcome –
- Comparing the APR rather than quoted interest rate – You need to look at the true cost of the loan, which is generally hidden. By comparing the APR (annual percentage rate) you can ensure that you are saving a half a point or more on the new loan. The hidden interest rates can actually turn out to be a lot. Therefore, re-evaluate the rate and fees before you actually commit to a refinance. If you have little or no equity you still may qualify for a refinance, by going for the HARP (Home Affordable Refinance Program) program by the Government. This can be a great alternative to an equity based refinance.
- Compare the lender services and save more – compare loan offers from more than one lender, in fact, compare the services of at least three competitors before you actually select the lender that you want to get the services from. A little effort in doing the comparison can save up to hundreds and sometimes thousands of dollars in more extreme cases. So, be sure to go for a comparative analysis and make a decision only after comparing.
- Importance of good credit to refinance – a credit score of 640 and above is required, even for a loan insured by the Federal Housing Administration. Therefore, you need to maintain good credit and avoid taking on new debt even after the refinance loan has been approved. In fact, it wouldn’t be a bad idea to rely on a lender that will help you understand the intricacies related to credit history and other legal formalities. A lender who provides education through the process is a good lender.
- Considering the reasons to refinance – There are many reasons to refinance. For instance, you might be looking for a better interest rate or looking to use the equity in your home to remodel or even looking to consolidate debts such as a personal loan, car loan or credit card into your mortgage so that you can manage your finances better. Refinancing your home loan may also offer potential tax benefits, and therefore, you can use those funds for future investment opportunities such as property, stocks or other options. It is always a good idea to consider all of your options as to whether you should refinance or not.
- Type of refinance loans – remember to choose only the option which makes sense. Considering the fact that there are so many loan products out there today it can be a daunting task to compare them all, it becomes imperative that you consider your requirements and your pocket book first. Fixed-rate mortgages are more expensive than their adjustable-rate counterparts, but they provide greater payment stability. So, if you plan on living in your home for a longer period, then this may be the best option for you. The decision is entirely in your hands.
So, consider all of the factors beforehand, rather than rushing to make a decision that may prove to be the wrong move.
This information is provided by 7th Level Mortgage. At 7th level Mortgage and the Mortgage News Channel all we need is a few minutes to determine how we can save you money and improve your current mortgage rate, payment, and financial well-being. Please call us or submit an online application at https://mortgagenewschannel.com/fast-quote/ and a representative will be happy to help you.