Refinancing your home is a very exciting process. Whether you’re looking to extend your loan so you can pay lower monthly payments or shorten your loan so you can pay less in interest overall, making your mortgage work better for your life is always a good thing. That being said, there are always a few things that are good to keep in mind when doing a home refinance to make sure that you’re getting the most out of the process. We’re gonna take a quick look at 5 tips that are great to remember when doing a home refinance of your own.
This may seem like common sense, but it is a step that many people overlook. It’s entirely possible to refinance and end up with a higher interest rate if you aren’t paying attention. This is especially common when switching to the same term loan, or even slightly shorter. It can take some math to make sure that you’re getting a better deal but it’s worth it.
It’s not always a good time to refinance. Interest rates go up and down regularly, so it’s good to be sure that you know if it’s the best time or not. Most experts would recommend seeing how the interest rates are trending. If they’re trending up it may be a good time if they’re still low enough to make a difference in how much you pay, and if they’re trending down it may be a good idea to wait for a little while to be sure that you’re getting the best deal possible.
When you refinance you can expect to lose a great deal of your home equity, which means that any home equity line of credit you could get in the future would be a lot lower than if you didn’t refinance.
This is another one that may seem like common sense to most people, but it’s good to know exactly why you’re refinancing before you even start looking. Are you looking to shorten your loan or are you just looking for a better interest rate? Knowing this before you start researching can help you be sure that you’re going to be looking in the right direction and not getting sidetracked.
Read every last word of the paperwork you have available. In your current mortgage, you want to be sure that you understand every additional cost that could be associated with doing a refinance. This most commonly comes in the form of a prepayment penalty, but it can vary from mortgage to mortgage. You also want to be sure you read and understand the terms of the refinance before proceeding, that way you know exactly what you’ll be paying, what kind of fees are involved, how difficult it will be to sell the house before the end of the loan term, and much more.
Refinancing is a great way to make sure that your mortgage is set up exactly the way that you need it to be. Lower interest rates, shorter terms, really however you need to shape your mortgage to best fit your needs. Making sure that it’s a good time and a good process for you will make sure that you get the best deal in the best possible format for you.