Tips For Refinancing Your Mortgage – Guest Post
Across the world, mortgage interest rates are at a record low, nearly the same as twenty years ago. For many people, this is a good chance to refinance the mortgage and take advantage of the new rates to pay off some undesired expenses that have been lingering around in the background.
If you’re considering refinancing your mortgage, there are specific helpful tips that every home buyer needs to be aware of. This article will address some of these concerns and hopefully provide you with a bit of information about refinancing your mortgage.
First, you need to decide just how long you plan to live in your home. It might not be that beneficial to refinance if you’re planning to remain there for a long time. This is because you may have a perfectly fine and reasonable mortgage rate on your current mortgage and the expenses involved in refinancing might not pay for themselves in the years to come. So be very careful when refinancing over a long term period.
A large percentage of people get their mortgage refinances and they plan to use it for paying off credit cards with high interest rates, or other lines of credit that they have. Others use it for paying some important and substantial expenses, such as their college tuition, medical expenses or any serious emergencies that arise.
Next, you must look into just how much lower are the refinanced rates. Traditional wisdom dictates that if the new refinancing rate is not at least two full points lower than what you currently have then it may not be a good enough reason to go ahead with it. It will probably not be worth all of the hassle associated with the paperwork, the calculations, or the time it takes.
You also must determine by inquiry exactly how much the closing costs will run you. Obviously, the lower these costs, the more money stays in your pocket at the end of the day. But especially if one individual lender has prohibitively high rates, you should definitely scoot far away and try to find alternatives. There are many, many alternatives out there so do not settle for anything but the best deal that you can possibly find. When taking out a loan of $50,000, a 1% difference in the interest rate can be thousands of dollars over the years. So do not be impatient when it comes to searching, make sure to explore all of your options.
Moreover, determine how much equity you have currently built up in your residence. Ask yourself if you really have enough to extract a healthy lump sum of your refinancing, or will your closing costs tie up all the equity you have. If you only have $10,000 in equity, it’s probably not a good idea to consider a refinance. A large percentage of that will go to the closing costs and you simply won’t be able to cover them with the lower interest rates. You even be better off keeping that bad debt on your 15%/year credit cards.
You should always try to think of your finances in terms of simple economics principles, instead of your emotional responses or ties to the loans or debt. It can be difficult to have your credit cards stacked to the maximum, but it may be more costly to refinance your loan.
Back on subject, a low rate can conceivably save you thousands of dollars over the life of the loan. So make sure you never just go ahead with the very first lender’s offer vis-à-vis their best rates and closing costs quote. You should shop around to at least three lenders, preferably ten, for the best rates and lowest overall costs. It can only take an hour or two to call ten different companies and get quotes from them and it will at least save you a few hundred dollars if not thousands.
If you have bad credit, make sure to try to remove all of your blemished accounts before going in to a financial institution to applying for a new mortgage. This process will instantly raise your credit score into a much more positive, healthier level. This means you will qualify for lower rates and potentially a larger credit amount.
With some lenders’ mortgage rates as low as 2.67% APR, it’s a clear that this is a good time to consider refinancing your mortgage. But just make sure you go about it in an intelligent, well prepared manner and do not rush into the first few deals that come along.
Dan Munteanu is the author of this article and recommends using Kanetix to get mortgage rates quotations. The company offers personalized rates from several financial institutions throughout North America.