Tips for Homeowners Who Want to Refinance
Are you considering refinancing your home loan? Perhaps you would like to drop your interest rate, cut your monthly mortgage payment, or show that your credit has improved. If so, we have compiled a few helpful tips for homeowners who wish to refinance their mortgage.
First of all, what exactly is refinancing?
Refinancing is the process of replacing an existing loan with a new loan. The new loan pays off the current debt, and implements a new loan amount. The new, refinanced loan typically has better terms that improve your finances by saving money and/or making your monthly payments more manageable.
Tips for Refinancing Success:
- Boost your credit score. If you refinance with an improved score, you may be able to get a better interest rate which will lower your monthly payments.
- Make sure to find a reduced interest rate. Make sure to review the interest rates you’re being offered. More importantly, make sure that they’re lower than your original mortgage loan. Also, borrowers with older mortgages may find better rates since market conditions have changed.
- Look into lowering the cost of your monthly mortgage payments. Refinancing your mortgage (after paying on it for a few years) is one way to cut monthly mortgage payments. For example, a borrower who has paid on their home for five years may choose to refinance to a new 30-year mortgage loan. This refinance allows borrowers to spread out the existing mortgage balance over the new 30-year term rather than the original loan’s remaining 25 years.
- Conversely, you could reduce the time it will take to pay off your house instead. Some homeowners want to refinance from a 30-year mortgage down to a 20-year, 15-year, or a 10-year mortgage in order to build equity in their home faster. These people will face higher monthly payments, but they’ll also pay off the loan sooner. However, this route should only be taken if you have the financial means to do so.
- Prepare for retirement. It is important to consider how income will change after retirement. If you’re facing retirement, it may be time to refinance so that you will know how to budget your future.
Refinancing is a valuable resource that can make your mortgage more manageable for you and your family. If the tips have been helpful and you’re ready to consider refinancing your home loan, contact one of our loan officers to get started. You can give us a call at 800-759-7224 or find a loan officer in your area.