Tips On Refinancing Your Home Mortgage

If you have a mortgage with an interest rate of 5% or more, you may want to consider refinancing it. There has been a slight rise in interest rates as of late, but they continue to be historically low. On average, a 30-year fixed rate mortgage currently stands at 3.87%, or 3.11% for a 15 year mortgage. This means that if you pay more than that, you should consider a change.

Of course, there are other considerations to make as well. Refinancing your mortgage is only a good idea if it will will actually save money. This is particularly true if you have a limited amount of time remaining on your mortgage, and a new one would be paid over a longer period of time.

There are now numerous opportunities for people to complete a refinancing of their mortgage. Some of those are now actively warning homeowners against the lure of “rates as low as” advertisements. Additionally, they are concerned about how easy it has become to get approved for a mortgage.

“Traditionally, it would take one week to several months to be approved for a housing loan, all of that, of course, after you’ve spent weeks shopping for that loan in the first place. But with Rocket Mortgage, shopping for a loan and applying for it is a process that requires little in the way of time and effort.”

According to financial experts, what matters most is to understand the process of refinancing. This will empower people to make the right decisions in terms of their own finances. Additionally, it will help them avoid being drawn in by clever advertisements.

11 Tips on Home Mortgage Refinancing

1. Get your credit in order. It is very important to have a good FICO score.

“Just because you want to buy a home doesn’t mean that a lender is eager to loan you money. Lenders look at your past history in handling your finances, which is where the FICO score comes in. The FICO score boils your credit history down to a three-digit number that instantly tells a lender whether you are creditworthy. This score dictates what terms – if any – you will be offered in a mortgage.”

2. Know the value of your home. This means that you have to have an official appraisal completed as well.

3. Have all your documents in order. You will need proof of employment, assets, and income. The more documents you have available, the better.

4. Make sure you receive at least three quotes. Your bank should be one of those, but do also consider an independent broker. Remember that, unless these quotes are based on your actual credit score, the amounts mentioned on them may not be fully accurate.

5. Consider paying mortgage points. Mortgage points have the capability to bring your rate down.

“Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments.”

6. Make sure you compare the points, fees, and interest rates. This will allow you to get an accurate idea of what each option costs. There are also other fees to think about, like title costs, local taxes, and state taxes.

7. There is no such thing as a “no-cost” refinance deal. If you don’t have to pay any fees, it is because they have been built into the principal balance or the interest rate.

8. Work out whether lengthening or shortening your mortgage is a good idea. A new mortgage means that the payment term starts from scratch again, which means you may be tied down for another 30 years. There are also shorter mortgages, but that means paying more each month. Work out what will work out best for you.

9. Don’t take cash out unless you really know what you are doing. Sometimes, you can use cash out to increase the value of your home, for instance if you install a new kitchen. But if you take it out for your child’s college fund, for instance, you won’t get anything back for that.

10. Be aware of your closing costs. Those include the costs charged by the bank, your taxes, your title costs, legal fees, escrow, and more.

11. Don’t sign anything until you have properly reviewed all documents and the small print.