Refinance Your Mortgage

The benefits of mortgage refinancing for several borrowers is that it lowers payments on a monthly basis and makes cash available for spending or investment. However, it is not advisable to jump on the refinancing bandwagon.

1. Know what will influence the rate that you will receive. Here are the elements that will determine the rate you will receive:
   • Loan size
   • Your credit score
   • Paid points
   • When is the closure of the loan?
   • Locked or floating rate
   • Debt to Income Ratio
2. Understand that advertised rates are not reliable. Experts say that when mortgage refinancing companies publish their rates, it is most likely that only about 10% of applicants get to avail them. The displayed low rates are used to lure people. It's not wise to fall for them.
3. Know what type of loan you want. Disclosing details to the loan officer will facilitate the process towards being given the best possible rate. State how long you would be able to pay off your loan and how much you would really need. Are you into paying points to lower the interest rate? Contemplate well before deciding to nod on any offer. If you inform your loan officer immediately regarding information that will reveal whether you meet all the requirements or not, the sooner you will know if you will be exempted from paying the other additional fees.
4. Shop around. This is one of the best ways to go with any kind of transaction. Know the credibility of your choice lenders.
5. Allow ample time for you to get the hang of all the mortgage terms if you're a newbie on this industry. Doing your homework will save you not just some money but also from future headaches.

Tips

• Dropping of rates - Usually, when rates drop by 1% to 2% mortgage refinancing can be one good option.
• The need for extra money - One choice is to resort to home equity line of credit when you are faced with the need for additional cash. With a checking account, credit account, or direct payment, this allows you to borrow against your home's equity.
• Consolidation of debts - Through mortgage refinancing, consolidating your debts into one payment is viable if you have equity in your home. But you must still consider the rates' dropping before using refinancing in consolidating your debts.
• Staying in your home for an extended period of time - The lower interest rate for refinancing can be best enjoyed if you are to stay in your home at least 5 years.
• Reducing the mortgage term - Larger monthly payments will enable you to pay your loan quicker. Since shorter term programs have lower interest rates, surely, you'll be able to save more with this kind of refinancing.
• You may want to avoid "no cost" refinancing. This is because when one says no cost, it does not translate to free. What happens is you are charged a higher interest rate for the life of the loan. In essence, the lender is paying you points which offset the closing costs. If you only plan to keep the loan a short while, this could work to your advantage since the increased amount of interest you pay during the time you keep the loan may be lower than the closing costs you would have otherwise paid. Typically, the no closing cost option is advantageous up until about the third year, however, this can vary by state and your specific situation.
• Consider using a Mortgage Broker, they usually have hundreds of lenders to shop from so they can get you better rates than you can get on your own. You'll pay a brokerage fee (usually a percent of the loan) but they do the work for you.