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Easy Tips to Refinance your Mortgage


With the lure of record low interest rates, many homeowners are considering refinancing their homes to take advantage of lower payments and/or the chance to pay off their mortgages faster. Even so, the process of actually refinancing your mortgage is not always so simple. If you are considering refinancing your mortgage, but just are not quite sure whether it is the right move for you at the current time, consider the following tips.

Before you do anything else, make sure you check the current payoff on your existing mortgage loan. This can be critical because even if you are able to obtain a lower interest rate, obtaining a new mortgage isn't necessarily the best choice. Traditionally, the general rule of thumb stated that if you are not able to obtain an interest rate that is at least one percentage point lower than your existing interest rate, it might not be financially wise to refinance. This can be particularly important if you do not think you will be in your home for much longer. If you do not plan to remain in the home for more than two years, you may find that it just isn't a good time to refinance given the taxes and closing costs you will pay to refinance.

You should also keep in mind that refinancing your mortgage won't get rid of your debt, it will simply restructure it. This means that you need to be careful about analyzing the overall amount you will be able to save through refinancing when compared to the amount of time that it will take for you to recoup the amount you will pay out to refinance. Overall, the typical cost of refinancing usually ranges between 3% and 6% of the total outstanding principal.

In the long run refinancing can usually help you to save money, but always remember that refinancing is not an overnight fix. In the last year or so there have been new safeguards put into place as a result of the housing crisis. This might be beneficial, but it also means that it will take longer to make it through the refinancing process. The bulk of this will involve paperwork, but you should also expect to spend longer in closing. The best way to combat this is to make sure you have all of your documentation gathered as soon as possible.

You also need to consider the length of your mortgage when considering whether now is the right time to refinance your mortgage. For example, if you only plan to remain in the home for a short while, your best option might be an adjustable rate mortgage that reflects a cap on how much the interest rate can rise. Of course, if you think you will remain in your home for some time into the future, your best option might be a 15 or even a 30 year fixed rate loan that will provide you with the most security and fixed payments.

Just as it was important to shop around for the right lender when you originally obtained your mortgage, it is also important to shop around when looking to refinance. Many homeowners never stop to consider that their original lender might actually be able to provide them with a competitive refinance rate. In fact, they may even agree to waive some of the costs associated with refinancing. Furthermore, you may find that you can enjoy a much speedier refinance with your existing lender than with a new company. At the same time, do not be cautious about shopping around and even trying a mortgage broker to help you find the best refinancing rate and terms.

Knowing what to do when you are ready to refinance is critical but it is also important to know what you shouldn't do during this important financial decision. One of the most important mistakes to avoid is going with a lender that approaches you instead of the other way around. You should always be wary of any lenders that solicit you. At the same time, keep in mind that your monthly mortgage payment will not be as important as the amount you owe in the end.

Refinancing can be a great way to lower your payments and perhaps even pay off your mortgage early. Be sure to take the time to analyze whether it is the right time to refinance and if you do decide to refinance, shop around to get the best possible deal. Rates continue to slide, you may want to get a custom refinancing rate quotes here!


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