Take some time before filling out the paperwork. (iStock)
Record low interest rates attract homeowners to refinance mortgage loans in large amounts. If you would like to start refinancing a mortgage so that you can take advantage of low rates, you may want to take some time to research before proceeding.
But you do not want to wait too long, otherwise the mortgage refinancing window may close. It is always a good idea to use a market like Credible to learn more about refinancing and to determine if it will really save cash in the long run (as well as to ease financial burdens in terms of monthly payments).
What do you need to know before refinancing?
While many people may benefit from refinancing, it may not be the best choice for everyone. Here are some things to consider:
1. Will you have to pay unfavorable market money?
All new home financing sold to Fannie Mae and Freddie Mac will incur an unfavorable 0.5% market fee. This cost is in addition to the amount your lender charges for the loan. The fee does not apply to loans under $ 125,000. The refinancing of a $ 250,000 loan has an unfavorable market fee of $ 1,250.
Fortunately, Credible makes it easy to compare mortgage rates. Click here to see current refinancing rates and home loans based on April fees and monthly payments, depending on your loan amount.
WHO IS RECEIVED FROM THE NEW HOUSE FINANCING MONEY?
2. How much home ownership do you have?
Ideally, you should have at least 20% in your home to refinance. By refinancing with at least 20%, you can eliminate any private mortgage insurance and be eligible for lower rates. If you prefer to refinance with less than 20%, you may pay higher rates and probably still have to pay PMI.
If your goal is to reduce your monthly payments or save money, you should use an online calculator to determine if refinancing your home is a good option. You can also go to Credible to reduce the numbers and determine your estimated monthly payments and more.
REFINANCE YOUR MORTGAGE BEFORE REMOVING LOW RATES
3. What is your break-even point in refinancing the costs?
Since refinancing your home loan means you have to replace your old loan with a new loan, you have to pay loan fees which may include the origin of the loan, valuation and filing costs. Usually a lender can charge up to 1.5% for a loan start-up fee. Additional fees increase your total borrowing costs.
For example, if you refinance a $ 300,000 loan, your fee may include the following:
- 0.5% adverse market fee: $ 1,500
- 1.5% loan start fee: $ 4500
- Rating fee: $ 400
- Title Insurance: $ 1000
For this sample, the total cost is $ 7,400.
Let’s assume an original loan of $ 450,000 with a monthly payment of $ 2,135 and an interest rate of 3.9%. If our monster homeowner only owes $ 300,000 to the home and refinances to a 15-year loan at 2.9%, their new monthly payment will amount to $ 2057. This is a saving of $ 80 per month. The owner will have to stay in the property for 7.7 years to make amends.
These numbers are just an example. Go to Credible to contact experienced lenders who can answer your mortgage questions.
HOW TO EXPLAIN YOUR RELATIONSHIP
4. Which is more important: save money now or pay off your loan faster?
Before you refinance, know if you want to save more money each month and if you want to pay off your loan faster. Opting for a 15-year refinance can increase your monthly payments, but you can repay your loan faster. If you refinance in a longer term loan, you can reduce your monthly payment and release extra cash each month.
HOW THE FINANCING OF YOUR MORTGAGE CAN RETURN MONEY BACK
How to get the best refinancing rates
If you decide that refinancing is the right choice, you can maximize your savings by getting the best rates. Some ways you can get better rates are:
- Look around for lenders
- Increasing your credit score
- Choosing a 15-year loan
1. Shopping for borrowers
Take the time to get estimates from multiple lenders. Potential lenders should be able to give you estimated fees and an estimated monthly payment before you agree to work with them. Do not just assume that your current lender offers the best rates. A company is often willing to offer better rates or repayment terms to make your business stand out.
To make shopping easier, Credible offers you the opportunity to see loan options from multiple lenders with less paperwork.
WHY IT IS A GOOD IDEA TO REVIEW YOUR MORTGAGE WHILE RATES ARE LOW
2. Increasing your credit score
If you want better rates, improve your credit score. The Federal Reserve has announced that rates could remain low until 2023. Although rates may rise sooner, you probably still have time to improve your credit score to qualify for better rates. Simple ways to increase your score are to pay your bills on time, reduce consumer debt, increase credit lines (to reduce your debt income), remove errors from your credit report, and keep old accounts open.
If you want to get pre-qualified rates without affecting your credit score, you can check with creditworthiness the possible rates of multiple lenders without withdrawing your credit.
Choosing a 15-year loan
The interest rate on loans with a fixed interest rate of 15 years is usually lower than the average rate for a fixed interest rate loan of thirty years. At the time of publication, for example, the average thirty-year loan was 2.77%, while the average interest rate on a 15-year mortgage was 2.21%, according to Freddie Mac. Lenders offer lower rates on shorter loans because their risk is lower.
If you are not sure that you will stay in the house for more than a few years, you can save your money to make sure it is a good price for you.
HOW TO REFINANCE YOUR HOME MONEY CAN SEND MONEY BACK IN YOUR POCKET