Many homeowners do all they can to reduce the interest rates on their mortgages. While these interest rates are necessary for lenders to mitigate any risk when homeowners borrow money to finance the purchase of their house, they can increase the total amount that needs to be paid back, ultimately increasing how much money you owe.
To help you find the best mortgage rates and decrease the total loan with lower interest rates, you can opt to refinance. This is where the lender will pay off your existing loan and replace it with another loan with more favorable terms. By keeping the following tips in mind, you can save both time and money and get a new mortgage more easily.
Decide Why You Want to Refinance
Understanding exactly why you want to refinance is essential to save time, money, and effort discussing your plan of action with your mortgage lender. Homeowners choose to refinance for several reasons, the most common of which is to pay less interest in the long run. If you’re struggling to pay off your monthly dues, then perhaps a mortgage refinance to a longer loan term with lower monthly payments will be more manageable.
Refinancing your mortgage can help you pay your loan off more quickly. If you are more financially able now than when you first took out your loan, you can shave a few years off your term with higher monthly payments and ultimately save thousands of dollars on interest fees.
Some homeowners may find that the interest rates on their current mortgage are too high for their liking. Finding another mortgage with a lower interest rate and then financing can help save a significant amount of money over time.
On the other hand, getting a cash-out refinance will provide advantages for people looking to make home improvements, add more money to their retirement savings, or pay off a debt. This works by replacing the current mortgage loan with a higher one, and you can use the difference between the two loans as you wish.
There are also mortgage insurance premiums for FHA loans that are built into the monthly mortgage. Homeowners who reach 20% equity can refinance to a conventional loan to remove the MIP and save.
Familiarizing yourself with the ways you can refinance and having a clear idea of what your needs will require makes it easier to find the right lenders. It’s best to work with one who specializes in the type of refinancing you need to ensure that you get the best mortgage refinance rates possible.
Improve Your Credit Report
Before you consider refinancing, take a look at your credit report and overall score. This is a big factor in determining the interest rates you are eligible for when you refinance. Before making this move, try to improve your credit score over time to show lenders that you can pay back the money lent to you. Doing so will improve the chances of you being granted a lower interest rate and paying less in the long term.
Take note that there are common credit reporting errors that you can dispute to ensure that you maintain good standing. Some of the most common ones that can impact your credit report are simple errors in the spelling of names, the accuracy of addresses, and completeness of personal information. Reach out to your reporting bureau immediately if you notice any inaccuracies in personal information.
Credit scores can also drop if your account is listed as “closed by lender” even though it was voluntarily closed by you. The same goes for accounts that have negative items appearing more than once. This includes bad debts and failure to pay them back repeatedly. However, ensure that your bureau removes negative items like missed payments after seven years to reflect a more accurate credit report.
Refinancing is a practical way to ensure that you can manage your mortgage payment depending on your needs. Whether that’s reducing monthly interest payments on top of your loan, cashing out to advance your retirement savings, or lowering the overall cost of your loan, there are different refinancing options that can save you time, money, and effort. By working with the right lenders, you have a greater chance of getting a new mortgage that works for you.
Here at Frontline Financial, we work to ensure that veterans have access to opportunities in buying their dream homes. Reach out to us today to take out a purchase loan or refinance mortgages in Salt Lake City for the home of your dreams!