With interest rates today at historically low levels, now could be a great time for many people to refinance their mortgages. While rates are incredibly low, there are some tips that you should consider before you refinance your mortgage.
How Much Will You Save
The first thing you should consider is how much money you will actually save. As opposed to focusing on what your payment savings will be, you should focus on how much less you will spend on interest. You should focus on how much you will save each month as well as how much you will save over the course of the loan. You also need to consider how this will impact your tax liability as your deductions will decrease.
What Will the Costs Be
Before deciding whether or not you should refinance, you also need to consider the costs of refinancing. When refinancing a mortgage, you will have to pay for an appraisal, title insurance, and a variety of closing costs. These costs at times can end up being thousands of dollars. You could look around for options to get a free quote, but this isn’t universally available.
How Long Will You Keep the Mortgage
You also need to consider how long you will keep the mortgage. While most mortgages have 30 year terms, most are paid off well before then through either a sale of the property or refinance. If you think that you may pay the mortgage off in the next few years, the costs associated with the refinance may exceed to interest savings.
Will You Qualify
The fourth tip to consider are the qualifications. Mortgage lenders require that their borrowers have a good credit score, a strong income they can support the loan payments, and at least five percent equity in their homes. Before starting the application process you should pull a credit report and try to determine the value of your home to ensure that you meet the basic requirements.
The fifth tip you should consider is if you will be able to negotiate. Banks are always looking for qualified borrowers, so if you meet their basic qualifications they may be willing to negotiate with you. To enhance your negotiating power, you should get quotes from a few different banks and use them to negotiate off with one another.
Mortgage interest rates today are at historically low levels. For many people, this could make now a great time to refinance their mortgage. If you are thinking of refinancing your mortgage you can consider the preceding tips, and talk with those that can help guide you in your personal financial handling.