4 Things That Matter Most When Refinancing Your Mortgage
Refinancing your mortgage can be rewarding on many levels. If you got a bad home loan deal before, you could redeem yourself by obtaining much lower interest or turning rate from adjustable to fixed. Resetting the clock of your mortgage also lets you pick a fresh, more suitable term. If your property’s value increased since buying it, or you’ve paid your balance down enough, a refi can help you ditch the private mortgage insurance.
The benefits of refinancing your loan are indisputable but are not universal. This option isn’t for everyone. To know whether it can be advantageous to you or not, here are the things you need to consider:
Why would you want to restart your loan in the first place? Is snagging the lowest mortgage refinance rate in Utah, New Mexico, or Connecticut your primary goal? Perhaps you want to turn your house into an ATM by tapping the equity you’ve built over time? Maybe you’re attracted by the merits of a fixed-rate loan or a shorter mortgage term? Figure out your biggest motivations for considering it to shop around with a sense of direction, and make sound decisions.
Your Home Equity
Ideally, you must have plenty of home equity to succeed in refinancing your mortgage. Having too little diminishes the advantages of a refi because lenders consider properties with low equity risky. In turn, you might not have any leverage during negotiation to secure a favorable deal.
Don’t walk into a lender’s office without knowing your home’s equity. With so many ways to valuate your property, you have no excuse to be unaware of it.
Your Break even Point
Applying for a refi only makes sense when it can save you money ultimately. The question is: when will that be? Do the math to determine the exact month when you’ll begin reaping its financial rewards. Take the expenses associated with the transaction into account to avoid skewing your judgment negatively.
Your Long-Term Plan with Your Mortgage
Getting a new mortgage is a major decision. Refreshing the term of your loan means waiting for a long period to begin trimming your loan’s balance again. In standard fixed-rate amortization schedules, most of the early payments go toward the interest. If you’re planning to move and sell your house before reaching the break even point, going down the refi route might not be a logical move.
Speak with a reputable mortgage company to discuss your situation properly. If you put enough consideration, deciding to (or not to) refinance your mortgage can put you in a better financial position.