Home Finance Tips For Refinancing Your Mortgage

Tips For Refinancing Your Mortgage

by pps-DUEditor

When mortgage rates are low, many homeowners rush to refinance their loans. However, if you don’t know what to look out for, you may end up making an expensive mistake. Here are 5 tips to help you refinance successfully.

Don’t Only Consider The Interest Rate

Refinancing to a loan with a low-interest rate does not mean you will save money on your new loan. It’s important to consider how long you will stay in your home and the costs of signing up for the new loan and assess whether you will still stand to save money by refinancing to a lower-cost loan.

Keep Your Credit Score Up

If you are looking to refinance your loan, make sure to keep your credit score in top shape. There’s a better chance you’ll be able to find a loan with a lower interest rate if your credit score is higher now than it was when you applied for your first loan.

Lookout For A Fixed-Rate Mortgage

If you are on an adjustable-rate mortgage with a higher-than-average APR, you may want to consider refinancing to a fixed-rate mortgage with a lower interest rate.

Check What The Closing Costs Are

Before you decide to proceed with the refinance, make sure to check what the closing costs of the loan are. Certain lenders will allow you to include the closing costs in the loan amount, for a slightly higher interest rate. This makes sense if you know you’ll likely refinance again or don’t intend to stay in your home for too long.

Check If Tapping Into Your Equity Will Make Your Loan More Expensive

Many home buyers tap into the equity they’ve built up in their homes while refinancing. While doing this can help you access money when you are in need, you should also know that some lenders will charge you a higher interest when you do this. In this case, it may be best to first refinance your home and then get a home equity line of credit (HELOC).

To maximize the benefits of the refinance, remember to redirect the money you will be saving into other financial avenues like your retirement plan, insurance policies, and your emergency fund, among other things.

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