Finding a mortgage to fit your needs should be simple. The act of refinancing your mortgage involves paying off your old mortgage with a new one that has better terms. These benefits include such things as a lower interest rate, a lower monthly payment, or taking cash out of the equity in your home for a number of reasons. Follow these 4 tips to find the best mortgage for you options:
What are you looking to accomplish?
Before you decide to refinance your mortgage, look at all aspects involved to see whether it’s a good idea or not. What is most important to your financial future? Can you afford a higher payment in order to save more money in interest over the life of the loan? Do you need to save money right now on a monthly basis by paying off debts or extending your mortgage term? Come up with a wish list of things you would like to accomplish and see how much of it you can actually take care of once you speak with a licensed loan originator.
Don’t make a decision based on published rates.
Lenders will only advertise their best possible rates. These rates are only offered to about 10 percent of their applicants. The rate you will receive will depend largely on how big the loan is, your credit score, the equity in the home, the terms of the mortgage, and the points paid.
Speak to a licensed loan originator.
Most borrowers go into the mortgage process thinking they know exactly what they want. A lot of them end up closing on something different because they didn’t even know they could get something better – better meaning something that accomplishes goals they didn’t realize they had. Maybe you can spend a little more monthly and reduce your term from a 30 to a 15 year, saving you $100,000 over the life of the loan in interest. Maybe you have high interest credit cards that you are paying monthly minimums on that you didn’t realize you could roll into your mortgage and save $100’s or even $1,000’s every month. Don’t go into the mortgage process just looking for the lowest rate. Go in looking to accomplish your personal financial goals.
No-cost refinancing doesn’t exist.
You are either paying your costs in the rate or the points. They work hand-and-hand: higher rate/lower costs or lower costs/higher rate. You can go with an even higher rate and get credited back for your costs so they aren’t rolled into your mortgage balance. The option that makes the most sense for you will be dictated by your goals. If you are planning on moving in the next 3 years, you might want to go with the highest rate and lowest possible loan amount because you will only be making 36 payments. If you plan on staying in your home forever, you may want to buy down your rate with a couple of points. This will get you the lowest monthly payment, resulting in lower total payments over the life of the loan. If you can bring cash to closing, you might want to consider paying costs at closing, rather than rolling them into the mortgage, so you aren’t paying interest on that money over 15 or 30 years.
There are a lot of factors to consider when figuring out how to refinance your mortgage. Make sure to get the best mortgage for your needs by keeping these 4 tips in mind.
If you have questions about refinancing, fill out an application to speak to a loan specialist today!