Refinancing your mortgage is a major financial decision that is best made when you fully understand what you are getting yourself into. Know that although mortgage refinancing is quite common, the outcome and benefits will not be the same for everyone because of various factor that have to be considered. Below are some of the most important things you have to know before refinancing your mortgage.
What is Mortgage Refinancing?
Mortgage refinancing means getting a new loan on a home with a new set of terms. Most people choose a mortgage refinance to get a better interest rate or to change a loan’s length of payment in order to save money. Some choose refinancing to free up some cash that can be funneled elsewhere.
What You Have to Know About Refinancing Your Mortgage
Refinancing to a shorter term will mean getting done with a loan sooner although doing so will result in higher monthly payments. A shorter term also means paying less interest overall, thus saving money. Some homeowners may choose to refinance to a longer-term loan to have lower monthly payments which will allow them to allocate the money to other necessities or financial projects.
Mortgage refinancing is a decision that should not be made lightly. It is meant to improve your current financial situation and help you plan for the long-term. You need to consider your current home’s value, your current mortgage size, the terms of the new mortgage that you’re taking out, your current interest rate, the possible new interest rate, and closing costs plus fees. You have to make sure that any fees you pay will not cost you more in terms of long-term benefits.
When to Refinance?
Your credit score as well as other factors may have changed a lot since the time you first took out a mortgage. This means that you may now be eligible for better interest rates which can save you quite a sizable sum over the remaining years of payment. Aside from wanting to change the length of your mortgage to save money, you may also want to refinance to switch to a fixed-rate mortgage from an adjustable-rate mortgage which will then give you better control over your finances.
With the above said, refinancing is not for everyone. If your home equity is below 20% or if your credit score has gotten worse, you may not qualify for a mortgage refinance. The same is true if you’re planning to sell your house soon or if you’re going through a severe financial difficulty at present time. It is best to find the perfect timing before refinancing your mortgage so that you can be sure that you’ll be able to abide by the new terms.
Overall, your entire financial situation will have to be assessed before you go for refinancing your mortgage. Our mortgage professionals can help you determine whether refinancing your mortgage is the best choice for your situation. Contact us today to schedule a consultation!