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When to Refinance?

refinanceKnowing when to refinance your mortgage requires a lot of preparation and thinking. Here are some suggestions on how to approach and handle this situation.

Should You Get a New Loan?

While choosing a new loan with low interests has benefits, there are a few things you need to consider. How long are you planning to stay in the place? If it isn’t for very long, it makes no sense to get a new loan. Think about your long term plans. If you’re going to be moving soon, there’s no need to get a new deal.

Read the Fine Print

If the loan sounds too good to be true, it could be. Before you sign up, read all the documents, or have your lawyer check it for you. Knowing the right time when to refinance involves doing a lot of research. The offer looks good now, but what of the future? You could end up paying more in the upcoming months.

Fixed vs. Variable Rates

Always go for a fixed mortgage rate. It’s true that a fluctuating rate can translate to lower payments. But with a fixed rate at least you know how much you’ll pay. With a variable rate you’re at the mercy of the housing market. If the situation turns sour, you’ll end up paying more.

Even if the situation looks good, it takes very little for things
to change, so a fixed rate is almost always the best option.

Closing Costs

If you’re wondering when to refinance, you should think of the closing expenses as well. How much will it cost you to close that old loan and open a new one? Think of the expenses and if it’s worth opening a new deal. Estimate how much you’ll save on interest payments vs. closing that old loan.

Shop Around for Lenders

Don’t accept the first offer you see. There are a lot of lenders out there. Analyze their offers and see which is most suitable for your needs. Remember that your credit standing will play a crucial role. If it’s positive, you’ll have more options. If your credit is bad, there are still lenders who’ll make good offers. You just have to look around.

Other Tips on When to Refinance

Always check for hidden fees. Going through the loan / interest terms can be tedious but it’s necessary. If you agree to it, you can’t complain that the lender is trying to hoodwink you.

Under the right conditions, you can get a home equity loan or cash out. Either of these two will help you refinance and get you cash. The home equity loan, by the way, can be used to pay off other debts (i.e., on credit).

Finally, it’s a good idea to go over your entire plan. If you want to save money, you should account for the time you’ll spend in the place, paying up points, paying private insurance for the mortgage etc.

There are many factors to consider with regards to your mortgage. By accounting for the abovementioned facts, knowing when to refinance will be less difficult to determine.

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