Knowing when to refinance your mortgage can help homeowners save a great deal in the future and even allow for financial freedom sooner. Most old home loans take up to 30 years until the terms are fully met, this means that homeowners like yourself have to make payments for decades until the home is officially yours and out of danger of foreclosure. This is a heavy burden on many homeowners who are working hard to have a financially stable future.
Since the introduction of mortgage refinancing, many have opted to get this financial boost. Is it time to refinance your mortgage too? Here are the signs that refi is worth considering:
1. Introductory Interest Rate Has Passed
Many old loans are classified as ARM or as an adjustable-rate mortgage. This means that the first few years of the loan have a fixed-rate interest rate, but after the introductory period the rates increase. Homeowners whose introductory rates have passed end up with astonishingly high-interest rates in the years that follow. Refinancing your mortgage allows you to change the terms from ARM to permanently fixed-rate mortgages which mean more savings and added financial security.
2. If You Plan To Stay At Your Home Permanently
When you refinance your mortgage one part of the terms you have to pay attention to is the “closing cost”. This is the amount of money charged by the lender when you move out of the home and the refinancing mortgage is not yet fully paid. If you do not plan to stay in your house permanently, refinancing may be more costly than beneficial. For homeowners who plan to stay in the house longer refinancing is an option worth looking into since you can save a lot with the new, lower interest rates offered by lenders.
3. Do You Have Enough Equity?
Equity means the current value of your home. Most banks and lenders tend to only consider refinance applications for houses that have at least 20% equity. Some lenders will also approve refinance applications for homes with less than 20% equity, but the deals offered aren’t the best. If your home has built up more than enough equity, this can lead to savings because you will require a smaller refi than the original loan, which means lesser monthly payments.
4. Read The Terms Offered
People tend to forget about reading the new terms offered by their lenders. Only consider when to refinance your mortgage when the terms are shorter and offer lower interest rates. It is no use to get a refi that takes another 30 years to pay off when your old one only has 20 years left. When it comes to refinancing your old home loan, choose terms that are time-friendly so you do not have to start at the very beginning.
Choosing to refinance your home loan is a big financial decision to make. You may need to consider different factors, but when the signs are clear that it is time to refinance, take it. You will reach financial freedom and security sooner if you act responsibly. Find out more at refinancingmortgages.co.
This page is also a treasure trove if you are asking when to refinance your mortgage: https://www.federalreserve.gov/pubs/refinancings/.
When should you refinance your mortgage? There are signs you should recognize and our experts at refinancingmortgages.co list them down for you.