Refinancing is when you replace your current home loan with a new loan. With refinancing, you can save money and tap into equity. To do this, set your refinance goals and compare the fees and rates from different lenders.
Most people choose to refinance in order to reduce their interest rate, tap into the home’s equity or reduce their monthly payments. Other people refinance to switch from an adjustable rate loan to a fixed rate one, to get rid of the FHA mortgage insurance or pay off the loan faster.
Before you decide to refinance your house, it’s good to get advice from a real estate agent who has experience with the market and how things work in the real estate realm.
Financial advisors are good to talk to but start with a real estate agent who has a better understanding of things in the real estate industry.
It’s best to only refinance if you find another lender with better fees and rates or if you stand to save some money through refinancing. Here are tips to help you refinance your home successfully.
Make the move fast
If you think you want to refinance, be ready to make the move. The rates might not be any lower than they are today. Do some research and if rates at the right level to make you bite, then act quickly. Be ready to get the refinance application in as soon as possible. This helps you catch the new rates before they rise and avoid backups in refinance applications if the rates fall. If you are not ready to submit the refinance application, keep your credit score up and financial documents ready to go.
Work on your credit score
If your credit score is not in good shape, acting fast on the refinance may not be worth it. Your credit score plays a significant role in the rate you get and just because the rates are lower, it doesn’t mean that you qualify for a good rate if you have a bad credit score. Do what you can to raise your credit score.
Refinance to a shorter term loan
Refinancing to a shorter term fixed rate loan saves you money. First, the short term means saving more over the course of the loan through paying less interest and the interest rate is usually lower than the 30 year fixed rate loan.
Refinance into an adjustable rate mortgage
An adjustable rate mortgage comes with a lower interest rate as compared to the fixed mortgage. This is useful especially when you are planning to stay in your home for no longer than the fixed term period of the loan. As long as the loan makes sense and you understand the drawbacks with this loan, you can try to get the lowest rate possible.
Mortgage refinancing is complex and requires a person with experience and knowledge of the real estate industry as well as a good understanding of the financial implications of refinancing. Do your due diligence and consult a reputable lender before you make your choice.