Refinance Your Mortgage with These 5 Tips
Over time, the mortgage market fluctuates and creates new opportunities for homeowners to revise the terms of their mortgage. This is known as refinancing. When refinanced, a mortgage can include lower interest rates, home equity credit, and a restructured loan duration.
Homeowners will refinance for many reasons: to get a cash out, to buy out someone on the title, to consolidate their debt, for a low-rate bridge loan, and more.
Test out this Refinance Mortgage Calculator, and then see if the following tips can save you time and money in your search for the perfect home loan.
5 Tips to Refinance Your Mortgage
- Lock in a Cost-Efficient Rate. Ultimately, it is a good idea to lower your monthly payment and re-structure the length of time it will take to pay off your loan. If you are purely looking for a lower rate, according to the Federal Reserve Board, the interest on the mortgage needs to be 1-2% lower than their current mortgage loan rate. Keep in mind that a lower rate isn’t always possible during a refinance, depending on your reason for doing the new loan.
- Evaluate the Terms. When it comes to mortgage refinancing, you should always read the fine print. Some lenders may offer lower rates, but with much longer terms. To determine if a loan is worthwhile compared to your current mortgage, multiply what you are currently paying (principle with interest, but not escrow) by the number of months left. Do the same for the refinance option and compare to determine if it is a good fit.
- Consider the Benefits of a New Type of Mortgage. If you are looking to refinance your mortgage, a great tip is to check out the variety of loan types lenders offer. Each may have advantages and disadvantages, and one may be a better fit for your situation. For example, if your financial assets have grown or changed, you may benefit from switching to an adjustable-rate mortgage (ARM) or a fixed-rate mortgage (FRM), depending on your unique needs. Don’t forget about property taxes and escrow accounts, which can also significantly impact your monthly payment amount.
- Shop Around. The financially savvy homeowner is aware of the many options available for mortgage refinancing. Ask a lot of questions. What looks like a good deal might not be because fees charged may vary. Remember to include closing costs in your estimate of each refinance option.
- Refinance with a Mortgage Expert. At First Bank, we are skilled in helping homeowners refinance their mortgages. We are committed to doing our part to help local communities thrive and prosper through financial guidance and banking services. To discuss your mortgage refinance options, contact us today.
Loans are subject to credit approval.