It has been nearly ten years since the beginning of the global financial crisis and mortgage rates are still at historic lows, but where mortgage rates are today is not the only important factor to consider when refinancing your loan. Every homeowner’s financial situation is different. Here are four important tips you need to think about before you refinance
Are you planning on moving anytime soon?
It does not make much sense for you to refinance your loan if you think you may be moving in the foreseeable future. This is because even if you save money every month on your mortgage with a lower rate, the costs, and fees associated with refinancing.
It will require time to recover those costs from the savings you get over time with a lower mortgage rate.
What is your current Mortgage interest rate?
Before refinancing a home loan you need to compare your current rate with current mortgage rates. There is no rule of thumb on the difference between your current rate and the market, but obviously, if today’s interest rates are higher than your current rate, it will almost always not make sense to refinance. If rates are significantly lower than your current rate, then it’s time to start looking into refinancing.
What is the term of your current mortgage?
Sometimes your financial situation may allow you to refinance into a different product. For example, if you have a 30-year fixed rate mortgage, and you can refinance into a 15 year, you may be able to save significantly over time on the mortgage interest you pay. If you can handle a higher monthly payment, it may be a good idea to try a 15-year fixed rate mortgage which would allow you to pay off your home in half the time.
Shopping Different Mortgage Brokers.
Once you decide it is time to pull the trigger on a new loan, you need to make sure you shop around! No two mortgage lenders are alike, and it’s not just about the refinance rates they are offering. Some lenders have significant turn times in getting your refinance closed. Don’t be afraid to ask how long it might take to get your new mortgage. Also, almost all lenders will have some wiggle room on their interest rates so make sure you negotiate and compare multiple offers.