May 27, 2021
To refinance a mortgage means to pay off an existing loan and then substituting it with a new loan. Some homeowners choose to refinance their homes to get a better interest rate and term.
One of the top reasons homeowners choose to refinance is to lower the interest rate on their existing loan. Mortgage rates fluctuate due to different factors. If your current mortgage has a higher rate compared to the current market, it can be smart to refinance to lower your interest rate. The general rule of thumb when it comes to refinancing is if the rate is 1% to 2% lower than your current rate.
This can be important for homeowners who want to pay off their debt faster through a shorter term. A shorter term can mean that you will pay less in total interest. You would be able to save more if you can secure both a lower interest rate and a shorter term. However, you should always do the math to calculate the break-even point, total interest, and the overall cost to make sure it is in your favor.
Your credit score plays a central role in determining your mortgage rate. The better your credit score is, the lower your interest rate can be. So, if your credit score has increased since you applied for your mortgage, it might be a good idea to refinance your mortgage if you can get a better interest rate.
Refinancing is the same as applying for a mortgage. Keep in mind that it takes a substantial amount of time to refinance your mortgage. Not only is there additional paperwork, but you would need to spend a good amount of time doing research to find the best options that suit your needs. Before making this decision, calculate your total savings to see if it is worth the time and effort to refinance your current mortgage.
Refinancing is not for everyone so make sure to do some research to find out if it is right for you. If you do decide to refinance your mortgage, contact a lender directly or reach out to a broker to find out if you are approved and are qualified for refinancing. If you have questions, do not hesitate to contact one of our representatives today.