How Mortgage Refinancing Can Help You Save Money

If you are in the midst of paying off a mortgage loan, but there are other financial debts which are robbing you off your monthly income, then you need to think of mortgage refinancing. Mortgage refinancing can be a very effective tool that might help you secure better interest rates, increase the term of the loan, lower your monthly payments etc. In simple terms, you are looking at a second mortgage which will be a better deal than the original one. Your original loan will be paid off by the new loan and you will have a much lower rate of interest. But once again, you need to do your homework before you sign up for a mortgage refinancing loan. This small investment of time can reduce a lot of hassles for you later on.

Hunt For the Right Loan

You need to hunt around before you get a mortgage refinancing loan that is best suited for you. You will get different quotes and different interest rates. So you can compare the rates and choose the best one. You also need to research a bit on the current market rates. If the rates are higher or more or less similar to the current interest rates on your loan, then it is best if you wait for some time before you opt for refinancing. Ideally, you should wait until the interest rates in the market are 1 or 2% lower than your current interest rates.

Costs Involved and Cash

There are some costs involved in mortgage refinancing as well like any other loan program. You need to know about the costs involved in detail so that you do not get any unpleasant surprises later on. The costs are the origination fee and the closing costs. This amount might be as much as 2% to 3% of the actual loan amount. So you need to have some cash in hand before you opt for refinancing. Remember, the more cash you have in hand, the better your whole situation appears to the lender. So calculate these charges before you opt for refinancing.

The Good Faith Estimate

This is the most important tool that you request from the lender prior to selecting one. It will have the interest rates, the closing costs, lender fees, originating fees etc. Compare the good faith estimate from various lenders before you sign up for the mortgage refinancing loan. Do not opt for the loan program just on the basis of the lowest interest rates. Take other charges and expenses also into consideration.

Your Credit Ratings

Make sure that you request your credit reports from all three agencies and check it thoroughly. Even a small mistake in the credit reports can actually deny you the loan or make it a lot more difficult than it actually can be. So check this before hand itself.

Types of Interest Rates

If you are planning to stay in the house for a long time, then you might want to opt for a fixed price mortgage. This is the best option as it will not give you any surprises with monthly payments as the rate is fixed beforehand itself. If you opt for an adjustable rate mortgage, you might get a very low monthly payment one month, while it may be much higher in the next few months. So you need to select the right type of mortgage loan even while refinancing. Even if you are not satisfied with your current loan and you wish to switch to a different type of loan, then too you can opt for mortgage refinancing.

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Posted in: Money,Mortgage,Refinancing