Refinancing a mortgage might have already crossed your mind, but since it’s a major expense, you’ll need to give it a thought before making a decision. Aside from analyzing the closing costs, you’ll also have to think about the refinance rules. If you find it difficult to pay your mortgage, refinancing will help you reduce your monthly payment. Of course, it comes with a caveat. Before you consider mortgage refinancing, here are some questions that will help you to make the right decision:
1. Are the refinance terms favorable to me?
It’s easy to get carried away with what the mortgage refinance company offers. You’ll know whether the terms and conditions are favorable if you take the time to read the fine print. Some of the key points to check are the late fees or penalties. Lenders don’t have the same policies when it comes to late payments, so you need to be careful. Before signing the paper or agreeing to the terms, check if they are favorable and acceptable.
One thing you need to find out is how many instances of non-payment will lead into foreclosure. While you may find it convenient to pay off the loan in advance, some lenders don’t allow this practice. Review all the offers before you decide. You might have to scratch beneath the surface of the offer. Interest rates and other charges might hurt your budget.
2. Do you have an option to lock in the lower rate?
The purpose of refinancing is to save money on your monthly mortgage payments. Instead of going for the adjustable rate mortgage, you should consider locking in a lower rate. Doing this can save you from paying higher interest rates, which usually happens when you choose an adjustable rate mortgage. Imagine paying a higher monthly rate. You’re instantly defeating the purpose of mortgage refinancing.
3. Are you aware of your interest rate?
Refinancing your mortgage qualifies you for a much lower interest rate than the amount you used to pay each month. Don’t sign the papers unless you have thoroughly understood the rate and terms of your loan. Check the terms if they are still the same as what you have agreed initially. In case the rates change, be sure that you’re still getting a good deal. You might need to look at different banks to find out which of them offers the best mortgage refinancing terms. You can also ask if you can get lower rates or discounts for automatic payments.
4. Am I aware of the reasonable length of the loan?
Mortgage refinancing enables you to lessen the burden of paying your loan. You have two options to consider: Choose a shorter length of the loan or the longer payment term. Each option has its implications. For shorter loan length, you’ll need to pay the higher amount and go debt free after a few years. A longer term, on the other hand, lets you pay a lower rate, but expect to pay more in interest. As much as possible, you should refinance to a maximum of fifteen years.
5. Am I protecting my home and my financial future?
When money isn’t available, taking out a loan is the easy way out. If you intend to refinance by drawing out the equity of your home so you can use the money for financing a college education, home improvements or paying off other debts, then you’re only increasing the interest rate by extending the life of your loan. This practice can put your home at risk, especially when you’re unable to keep up with your monthly payments. This misstep can also change the value of your home.
Make a wise decision. Contact a local expert to know more about mortgage refinancing:
Cape Coral Mortgage, Inc.
3512 Del Prado Blvd. S Ste106
Cape Coral, Fl. 33904
(239) 540 5555