Mortgage Refinancing: Six Things You Need To Know
Friday, March 4, 2016, 6:00 AM | Leave Comment
When you are looking to save money, an excellent way to do it may be to get mortgage refinancing. Getting a lower interest rate and better terms can help your finances, but it may not be in your best interest to do so.
Before you make that move, here are six things you need to consider first.
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Wait Until There Is a Full One Percent Difference
One of the best things to look for prior to refinancing your mortgage is to wait until there is at least one percent difference in interest rates before even thinking about refinancing. If it is less than this, you really will not save enough money to make it worth your effort.
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The Cost of Refinancing
Every time you take out a mortgage, or refinance one, there are going to be mortgage finance fees. You can expect them to be about as high as the ones you paid on your first mortgage. By the time you add in these fees, you may find that you are not saving any money at all.
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How Long You Will Live There
If you do not intend to live in your current home for more than a couple of years, then it is doubtful if refinancing will be beneficial to you. Generally, if you cannot recoup the cost of refinancing before you move, it is not worth it.
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The Amount of Equity You Have
Many lenders today will not refinance a home that has less than 20 percent equity in it. If you have less, you will need to buy private mortgage insurance (PMI). If you buy PMI, it will mean that your potential savings are negligible. Some lenders may give you the refinancing, but you will not always be better off with it.
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You Need a Good Credit Score
Getting a new mortgage today with good interest rates requires that you have a good credit score. This usually means a score of 720 or better. Having a score lower than that means you are not apt to get a better interest rate than what you already have.
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Know What Your Home Is Worth
In some areas, the value of homes has dropped. If this has happened to your home, your new mortgage will not give you enough money to pay off the first mortgage. You may owe more than your home is worth.
Mortgage refinancing can be an excellent way to reduce your overall debt. It can give you a lower interest rate and lower payments, but it is only worth it if the conditions are right.
It’s also important to work with experts, like those at TruePartner Credit Union, to better understand the rates and loan options.
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