Dealing with a mortgage is always tricky when financing it. However, when you understand the indicators, you can always restructure it to fit your needs. Here is a guide on the signs that will tell you when to refinance it if you are looking for the best deals in the financial market:
When you are planning to buy another investment property
Buying a new investment property can sometimes help you grow your money value in the long run. However, this might be challenging when you have no idea on what to do during the time as you do pay the mortgage of your home. You may seek refinancing to aid you solve your problems.
When you are having huge debts
When you are at a point of defaulting on your personal debt, it is advisable to seek refinancing to assist you consolidate your debts as a way of easing your finances.
When there exists better rates within the market
The market rates often change with time. You must know the existing market rates when you need excellent deals. You can always refinance your loan when you find better rates within the market. With better rates, you will be certain of making some savings in terms of amount of money that you will repay as interests. Those who have tried it have been satisfied with the better market rates thus helping them save money whenever they are looking for excellent deals.
When you want to renovate your home
Think it is time to replace leaky faucets, repaint your home, or make major changes. This means you will need a strong refinancing procedure that may be a burden to your life. When you are in such a situation, you can take an opportunity to understand when to refinance to get out of it faster.
When rates in the market are about to rise higher
Though interest rates may be recording lows, you should always know that they would always fluctuate depending on the dynamics of the market. As a borrower, you can always anticipate a rise in interest rate through switching your loan to a fixed rate if your currently do have a variable rate. Through this, you will enjoy lower interest rate for a much longer at the same time enabling you make some savings depending on the amount of money that you would spend.
When there are changes in your financial situations
Having a rough time when repaying your mortgage can be difficult when you do not know what to do. However, through this process, you can always know what to do in your financial situation such as birth of a child or unemployment before seeking refinancing to switch to that loan you can easily afford.
The historic low mortgage interest rates are encouraging many homeowners to refinance their mortgage. Refinancing could reduce your monthly payments, and the total interest you will pay over the time you own the home could be much less. We have put together 5 tips for refinancing your mortgage, and you will find that these tips can save you money and make the process easier.
Research the lenders who are offering the low rates, and check the terms of the offers. Read the fine print of all offers that seem to be attractive. Always learn about costs like points which are fees paid to a lender for granting a mortgage. One point equals one percent of the loan. In some instances a great mortgage might be worth a point or two, however, read about our recommendation for making a cost-benefit analysis which follows. Be sure to find out what closing costs are charged, because these can vary widely. Also, research your current mortgage documents to see if you will be subject to a payoff penalty. These penalties are found in some mortgages, and they are applicable for from two-five years.
2. Make A Cost-Benefit Analysis
If you are working with a mortgage broker, then you will have an expert available to make this analysis for you. If you need to make this analysis yourself, then add up all of the costs involved in obtaining a new mortgage. You will have to estimate some of the costs, but you can get reasonably close to the number. One method for making the analysis is to add all of the costs to the amount of your current mortgage. Then look up the interest rate for this amount for the same number of years as your current mortgage is for. This will give you your new monthly interest payment as well the total interest over the life of the mortgage. However, you are interested in the monthly interest savings. While you may be able to pay for all of the costs in cash, this method will give you an idea of whether refinancing your mortgage will be cost efficient. A mortgage broker is in the best position to advise you about all of the factors in making a cost-benefit analysis.
3. Act Quickly
Once you find the rate you are looking for and decide that it cost effective, then act quickly to lock it in. Mortgage rates can change quickly.
Ask any question to clarify an issue you don’t understand. It is better to get the answer up front than to be surprised at closing.
5. Don’t Extend Your Current Mortgage
Avoid the temptation to borrow from the equity or to extend the mortgage term. Your objective is to reduce your monthly cash outlay.