10 Useful Tips To Help You Refinance Your Mortgage For A Better Rate!
If you are wondering whether or not you should refinance because you want different rates, don’t worry. There are quite a few ways to find the best rates for your financial situation. Let’s look at ten helpful hints to help you refinance your mortgage for better rates.
What Is Refinancing and What Does It Do?
Refinancing your mortgage can lower your monthly interest payments. It can also be used to consolidate debts and pay off any other loans faster. If you have home equity, you can take out money if you need to. During the loan’s term, you can save on interest rates by refinancing at the right time.
Refinancing a mortgage is when you renegotiate the old loan contract and select new terms. The new loan is usually created to have better terms so it improve your finances. It pays off and replaces the old loan. The new mortgage loan will often have lower monthly loan payments. You can refinance your mortgage as often as you need to, but make sure it makes sense for your financial situation. If you want to refinance again, you will have to wait six or seven months between refinancing opportunities.
Ten Helpful Tips
- Find the Best Lender for you: You may want to use the same mortgage lender who gave you the first mortgage, but you do have the option to find another lender. Find one that will give you the best deal. If you get a lower rate offer, you can ask your current lender to match it. Take your lender list and see what the closing costs, points and interest rates are for each. Just because a lender has the cheapest rates stated, those costs can make that lender more expensive in the end.
- Find the Best Interest Rate: This seems to go with finding the right lender. Pick the lender or company that gives you the lowest rate, taking your credit-score, home-equity and debt to income ration into consideration. You can ask for rate estimates. Look for the Lowest Rate: When you have a few lenders in mind, ask the lenders what they will charge in refinancing fees. You can compare each lender by requesting an itemized list of fees.
- Get your Finances in Order First: You can always wait to refinance. If you wait and make a few more payments, it will take off some more debt and build more equity. By just doing that, you can get a better refinance rate. You can also ask your lender about changing a longer loan to a shorter loan, for example a 30-year loan to a 20 or 15-year loan. This change can actually lower your interest rate. Research the available terms for your mortgage, and get a term that works for you. Consider a fixed-rate mortgage, as this will help you budget finances and save you money. Having a big downpayment will help too. The bigger the downpayment, the lower the mortgage rate. If you can put 20% down, you can save money.
- Build More Home Equity: you may be offered a lower interest rate if you have at lease 20% home equity when refinancing you mortgage. If you have more equity, you may get an even lower rate. Increasing the value of your home can get you better rates. Appraisals are not always necessary for refinancing mortgages, but an appraisal will help you if your house is worth more than what was stated by the lender.
- Home Improvements will help: Increasing the value of your home can get your a better rate, but remember renovations can be expensive so make sure the home improvements will save you money. Improvements could be fixing the roof, getting energy-efficient appliances, or even remodelling the kitchen.
- Improve your Credit Score: Lenders always look at your credit score so they can see if you make your payments. If you have a high score, your rate will be lower. Also, check your credit report for any errors. If you see any mistakes, you can deal with them right away and get your score corrected.
- Make your Monthly Payments: Try to make your payments on time. Making loan payments on time improves your credit score. Don’t be afraid to write dates down to remind you to make timely payments. Late payments will only hurt you and your credit score.
- Credit Card Debt: It is a good idea to pay down some credit card debt, as that will lower your credit utilization ratio. This ratio measures the amount of credit you use compared to your available credit. Lenders like you to have a ratio of 30% or less. Try to use a small percentage of your available credit. Remember to keep using your credit cards for small purchases once in awhile. By paying the balance off every month, it shows you can manage debt. It will be a good idea to refrain from opening any new credit accounts while you are trying to refinance.
- Lower Monthly Payments and Debt: If you can pay off a loan or credit card, that would get rid of a monthly payment, lowering your total monthly debt payments. You can also talk to your lender to see if you have the option to get your minimum payments lowered. There is also a chance you can get your available credit increased, but don’t do that if you have trouble managing the credit you already have.
- Lock in your preferred Interest Rate: When you find a good interest rate, lock it in. Loan rates for refinancing can change daily, so what is available one day may not be the next. A “Locked” interest rate will secure your rate for a set period of time. It usually locks for 30 or 60 days. By having a locked rate, you will be able to know exactly what your interest is. Write down the expiration date of your locked rate so you don’t let it expire.
Although not a refinancing tip, a bit of advice would be to plan what you are going to do with the money you save each month. So you don’t spend the savings, stick to the plan. There is a grace period between the old mortgage payments and the beginning of the new mortgage payments, so take advantage of this by paying off a credit card or do a home improvement.
The above tips should help you navigate the sometimes overwhelming task of refinancing your mortgage. Having the right mortgage lender can help make the process stress-free and enjoyable. By putting the tips and lender together, you can find the best rates and refinance your mortgage to suit your financial situation.