(Newswire.net — May 9, 2020) — Refinancing your mortgage is an important decision and not one to be taken lightly. There are many things to consider before refinancing: even seemingly minor factors can measure up to big changes in your monthly payments. Before you decide one way or another, it’s a good idea to think through the current interest rates, your home value, and more. To make it easier, we’ve packaged up everything you need to know before you take up a new loan in search of a lower interest rate.
Compare Interest Rates
Keeping an eye on the mortgage rate environment can save you money overall, or it can lose you money. Finding a lower rate is really a stroke of luck depending on the financial climate, the lender, and a host of other factors. A lower interest rate cannot be relied upon to come through every time, so it’s definitely worth making sure of the situation before committing to refinancing. Getting a new rate that pays less interest each month is a game-changer for your financial situation.
Work Out Your Home’s Equity
The equity of your home is essentially the difference between the value of your home and the amount still owed on your current loan. The more equity you have, the more borrowing power you have when going to mortgage lenders. Homeowners can increase their borrowing power if their property value has risen. This can allow you to use the higher equity as a bigger deposit, going towards a bigger loan or a larger amount of the total cost of the new loan.
Raising the value of your home is a good way of helping yourself out when considering this important factor. As a homeowner, you should take this opportunity to get your home in perfect shape. Employ specialist repair services, like heating and cooling repair in Livonia, MI to make sure everything is running as it should.
Take a Look at Your Own Position
After establishing your home’s value and position, it’s time to look at your own credit score. This is, of course, an important factor, as it affects your ability to take loans, what rate mortgage you can be given, and how much your monthly payments will then be. Factors that can affect your credit score include payment history, credit length, and your credit mix. For example, if you have a long history of paying off a range of diverse loans, like student loan debt, credit card debt, and a mortgage, your credit score will be stronger. You can get an expert appraisal of your position in a credit report to help you make an informed decision.
Work Out the Real-Life Cost of Financing
Once you have all the behind-the-scenes data to help make your decision, it’s a good time to get down to the nitty-gritty. There is a wealth of online tools that can help you work out what the actual costs of refinancing your mortgage would be. Using a calculator like this makes sure you leave no room for error when planning ahead for your mortgage payments.
Remember that there can be fees applied on top of the monthly repayments, such as admin fees, discharge fees, and more. This all needs to be taken into consideration when comparing your current mortgage with refinancing. If it won’t end up saving you much money, then it may not be worth it even for a lower interest rate.
Ask Yourself, “Why Now?”
Refinancing can be a good answer to some problems and a bad one for others. Why are you looking to make a change? Do you want to free up a chunk of money for another cost? Are you looking for a more flexible loan? Do you want to increase monthly savings? There may be other ways to achieve what you are aiming for without going through the refinancing process. It might be a good idea to talk to a financial advisor or mortgage broker before making your decision to get a well-rounded amount of advice personal to you.