Refinancing your mortgage is simply taking out a loan to pay off your existing mortgage. Refinancing your mortgage may be necessary for many reasons, but the most common reason is because mortgage interest rates are falling.
Refinancing to a mortgage at a lower interest rate can result in significant savings on your monthly payments. Refinancing should be considered when interest rates are at least half of what they are now. These are the things you should keep in mind when refinancing your mortgage.
Get several quotes
You will need to compare rates from several sources in order to ensure you get the best rate possible when refinancing. Your current bank is the best place to start looking for a quote, even if that is where your mortgage is.
Next, you’ll want to get a quote from an internet bank. Online mortgage brokers offer lower interest rates and fees than brick and mortar banks because they can save on expenses.
A Beverly Hills mortgage broker can help you find the right lender for your needs.
Here are some things to watch out for
While lowering your mortgage interest rate and your monthly payment might seem obvious, there are a few things you should consider before refinancing. You may have a lower monthly payment if you replace a 30-year mortgage with a 30-year one, but you could end up paying more over the term of the loan.
A 30-year mortgage combined with a 30-year mortgage may add years to the time it takes to repay the debt. This means that you will pay more interest on both loans over the life of the loan than you anticipated.
Refinance your 30-year mortgage to a fifteen-year mortgage is a great way to save interest. You will be able to pay your mortgage off in lower monthly payments if you take out a loan with a shorter term. This will reduce the interest you pay over the loan’s life.
It is important to remember that this strategy will increase the monthly payment. Larger payments will require you to pay your balance off in a shorter time. This strategy is great for those who have been living in their home for a while and are able to afford a larger monthly payment.
To avoid refinance fees and other hassles, you might be able to keep your current loan, but pay more to get it paid off early. You will need to check if the prepayment penalty is applicable to your current loan. For not paying back your loan on time, some lenders may charge a fee. It may be more sensible to keep your original loan, despite the higher interest rate. This is a rare situation, but it’s something you should be aware of.