Refinancing

Refinancing a mortgage is a great way to take advantage of historically low interest rates or change your payment terms to be more affordable. And with interest rates at historical lows, there’s never been a better time to refinance your mortgage. If you’re planning to refinance your mortgage this winter, though, you’ll want to make sure you get the best possible deal.

How can you make sure that your mortgage works for you, and not the other way around? Here’s what you need to know.

Know What Your Break-Even Point Is

Your break-even point is the point at which the extra amount you paid out of pocket for the refinance and the amount you saved in a reduced interest rate is equal. In other words, it’s the point at which a refinance actually starts saving you money – and it’s important that you know when that point is. If you pay $5,000 in refinancing fees and your refinance reduces your monthly interest payment by $200, for instance, you’ll break even after two years and one month.

Opt For a Shorter Loan Term, If Possible

Refinancing gives you the ability to turn a long mortgage into a short one. And although a shorter mortgage comes with higher payments, more of your monthly payment is applied to your principal. With a 30-year mortgage, for instance, you’ll be paying mostly interest for the first 16 years – but with a 15-year mortgage, your payments will go mostly toward the loan principal after just five years.

Try To Avoid Prepayment Penalties

A prepayment penalty is an amount of money you pay in order to pay off your mortgage early. If you experience a sudden windfall and can pay off your home in one lump sum, or if you choose to sell your home, you might incur a prepayment penalty. Not all mortgages have these penalties – so talk with your mortgage professional and let them know you are looking for a morgage without a prepayment penalty.

Lock In Your Rate

Mortgage rates are at historical lows right now. One of the biggest reasons why people refinance their homes is to get lower interest rates – which is why, if you’re refinancing your home, you’ll want to choose a fixed rate mortgage. It’ll keep your interest payments low and manageable, so you don’t pay more than you have to.

Know Your Home’s Current Fair Market Value

Housing prices rise and fall over time, which can impact your loan rate when you refinance. Higher-value homes generally get better rates, so make sure you know your home’s fair market value.

Refinancing often means better mortgage terms, so make sure you take full advantage of this opportunity. Call your trusted mortgage professional to learn more.

If you’re looking to refinance your home, you’re likely going to benefit from lower mortgage payments. But lower mortgage payments aren’t the whole story with a refinance. A refinance plan may change several key terms of your mortgage agreement – which may work for or against you.

Before you refinance, you’ll want to ask your lender these five key questions – it’ll help you ensure you’re getting a deal you can afford.

How Long Does It Take To Close?

Closing a refinance isn’t always straightforward, and in some cases it can take some time before your refinance is approved. For instance, your lender may want to assess your home’s value prior to issuing the refinance. In such a case, you’ll need to have a new home appraisal – which can extend the timeframe for closing.

What Are The Closing Costs?

Even though you’re refinancing, when it comes to closing costs, your lender will treat your refinance like a new mortgage. Oftentimes, closing costs will run between two and five percent of the purchase price, and will include title insurance, lender fees, appraisal fees, origination fees, and more. Before you refinance your home, ask your lender for a full list of your estimated closing costs.

Are There Any Additional Fees On Top Of Closing Costs?

Lenders often vary with respect to what fees they include in closing costs. You might need to pay for a property survey, land transfer tax, or insurance – and sometimes, not all of these fees are included in your closing estimate. You’ll want to ask your lender exactly what is included in closing costs and what additional fees you’ll need to pay.

Can I Prepay Without Penalty?

If you want to pay off your mortgage early, this could very well be the most important question you ask your lender upon refinancing. Some lenders will charge you a penalty fee if you make payments ahead of schedule. If you’re refinancing in order to get a lower interest rate and pay your mortgage off sooner, you’ll want to ensure that prepaying won’t lead you to incur penalties.

Can I Lock In My Rate?

Mortgage rates are low right now, but they’re likely to start going back up next year. So if you want to ensure you get a great deal, you’ll want to try to lock into a low rate now. Ask your lender if you can lock in your refinancing rate – it could save you a great deal of money in the future.

Refinancing your mortgage can seem complicated, but when you ask the right questions, you’ll ensure you get a great deal. Contact your trusted mortgage professional to learn more about refinancing.