Mortgage Refinancing Tips That Will Save You Time and Money: When interest rates are low, you should take advantage of them. By refinancing your mortgage, you may be able to take advantage of lower monthly payments.
Many experts see mortgage refinancing as a convenient and effective way to lower your monthly expenditures. Mortgage refinancing may be a sound economic decision if it can help you attain your financial goals.
Mortgage refinancing consists of replacing your current loan with a new loan. Ideally, the new loan will have terms and rates superior to your initial loan. Here we will focus on mortgage refinancing tips to save you time and money.
Is Refinancing My Mortgage a Good Idea?
If you can lower your interest rate by refinancing, we suggest doing it, especially if you are tight on cash.
The costs of refinancing must be strongly considered, like closing costs, home appraisal and legal fees might not make it worth it for some borrowers.
When refinancing is used wisely, it can help you save more money each month, fund renovations and other investments, or help pay off your mortgage faster.
Moreover, the refinancing break-even point needs to be considered. It refers to the point at which it is wise to get a new mortgage.
Compare and contrast different lenders in your area and their products. Try to calculate the break-even point with each, as it will vary based on closing costs, rates, and terms.
It is paramount that you explore all of the mortgage refinancing options at your disposal before making your final decision.
Refinancing Tips That Will Save You Time and Money
You need to work on improving your credit score. Avoid maxing out your credit cards, and do not delay or miss any payments to help improve your credit score—shop around to find the best deals on the market and tap into your home equity prudently.
If you have at least 50% equity in your home, you get cash for your home equity via a cash-out refinance. The money can be used to renovate your home to help increase its real estate value, growing your home equity in the process.
What’s more, you also need to cash out very carefully. We would not recommend using the money to fund short-term expenses, such as a cruise. Instead, the money should be put towards home renovations or a lucrative business opportunity that will pay dividends. In addition, you need to be fully aware of the real value of your home.
The real estate value of homes skyrocketed due to the pandemic. As such, the value of your home may have also increased exponentially. However, the only way to know for sure is to obtain an accurate estimate.
By knowing the actual value of your property, you can avoid overpaying for a mortgage refinance that could come back to haunt you in the future.
When speaking with your lender, try to negotiate fees and rates. If your lender’s fees and rates are unfavorable, move on to another lender that will cater to your needs and long-term financial goals.
How Does Refinancing Affect Your Credit Score?
When you apply for refinancing, your lender will perform a hard inquiry on your credit report to determine if you qualify. Your credit score will take a minor dip as your lender goes over your credit history and score.
If they notice that you have missed several payments on your former loan, your credit score will take a significant hit. Multiple loan applications will also impact your score.
If you want to apply to several lenders to try and get the lowest rate, then do some within two weeks or less to reduce the impact on your score.
Mortgage refinancing may allow you to enjoy a shorter mortgage term and lower interest rates to own your home quicker and save thousands. It may also allow you to tap into your home’s equity to obtain funds that can be used to tackle a financial emergency.
Sources:
The best way to refinance a mortgage | 6 Tips to save money (themortgagereports.com)
What Is The Refinance Break-Even Point? | Rocket Mortgage
How Refinancing Affects Your Credit – Experian
Mortgage Refinancing Tips That Will Save You Time and Money