Mortgage Refinancing Tips

Mortgage Refinancing Tips

Have you ever thought about refinancing your mortgage? There are some really good reasons to, but you need to take a lot into consideration before making the commitment. The following Mortgage Refinancing Tips and information can help you decide if refinancing is right for you, as well as point out some of the pitfalls.

Benefits

Timing and situation are crucial elements when deciding whether or not to refinance your mortgage. If the mortgage rate you are currently paying is 2 percentage points higher than the prevailing rates, it can be very worthwhile for you to start investigating brokers and lenders. A lower interest rate can equate to a lower monthly payment, especially if your original mortgage is at a high fixed or high annual percentage rate.

What makes that scenario even nicer is the predictability factor. You’ll always know what your monthly mortgage payment and rate will be.

If you are looking to Mortgage Refinancing as a way to free up some cash, the same 2 percentage point’s guideline mentioned above applies. Many people use the refinancing option as a way to pay off debts, make investments or gain access to their equity for other big ticket items.

Risks

As with all financial transactions, there is an element of risk involved. It is actually the lack of awareness that presents the biggest danger, so if you proceed with informed caution, you’ll do just fine.

To help you out, here are some things to watch for when refinancing your mortgage:

Percentage points – refinancing for anything less than a 2 percentage point drop is probably not a good financial decision. It may cost you rather than save you money.

Beware 0% starting annual percentage rate. Odds are that rate is going to rise substantially in a couple of years. Ask about this when discussing details with your broker or lender.

Watch for hidden fee structures. Again, check with your broker and lender to ensure that all costs are laid out for you ahead of time.

Make sure to acquaint yourself with all the fine print of your original mortgage. Don’t find yourself trapped with additional payments because of prepayment or early payment clauses.

Do not let potential lenders do a credit check on you unless they’ve made your short list. Each check brings your score down a little. Only give permission to the lender(s) you think you’re going to want to deal with.

Practice due diligence when choosing a broker. You want one that’s honest, and that also sells more than his own product so you don’t end up corralled into one lending spot that may not be ideally priced for you.

Mortgage Refinancing Tips to Smooth the Way

Think of this as a check-list of things that you can do to make the process easier and safer.

Improve your credit score before refinancing. If you have any credit card accounts that you’re no longer using, close them in writing. Make sure that the company in question has labeled the account as closed at your request. This is important. You don’t want lenders to think it was the credit card company’s idea to close your account. Once you’ve done that, wait a month and then check your credit report to be sure your request has been filled. While doing so, double check the report for errors of any kind. If you find any, take steps to rectify them so you have a good report for future lender checks.

Do your research, and then carefully consider your options. If Mortgage Refinancing does not improve your current mortgage, or present other financial opportunities for you, it may not be a good idea to proceed.

Stay current with the market. Make sure you know what’s going on so you can make informed decisions. You’d also be wise to get a second opinion on any information that comes your way, especially if you’re not well versed on this topic.

Fill out pre-approval applications with various lenders. That will give you a cross-check of rates and conditions. You can see whose offer is the best.

Remember – DO NOT give permission or your social security number to any lender to do a credit check on you unless you feel certain that lender is a serious contender for your business.

Check with your current mortgage for any penalties that could ensue as a result of Refinancing your Mortgage.

Once you’ve chosen your lender, get a commitment up front and in writing as to the TOTAL costs involved. Don’t forget the fine print. Are there any penalties or fees that only apply if you do something different in future? An example could be early payment fees.

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