How to Refinance

Many homeowners keep a watchful eye on the housing market to see if they can ever get a better deal. One of the ways that homeowners can save money is by refinancing their current home. If the lowered mortgage rates are currently better than the rates that you have on your home loan, then it may be wise to look into refinancing in order to save a significant amount of interest over the life of your loan. But, before you jump on the refinancing band wagon, it is key that you understand the basics on refinancing first.

Before You Sign

You will want to take a look at your current loan in order to understand if there are penalties or fees for paying off that loan early. Essentially when you refinance you are getting a new loan that pays off and completes the previous one. So, if your current loan has penalties for an early pay off then it may not be worthwhile to refinance.

And, you need to be sure that you understand the new loan before you sign. The low interest rate may be appealing but you need to ask if it is a fixed or variable rate. If it is fixed then you will have that rate for the entire life of the loan. However, if it is variable then the rate could fluctuate with the market and you could get stuff with a rate that is higher than your current rate in the end. It is not wise to go with a variable rate when you refinance.

If you are looking into switching lenders in order to refinance then it is important that you shop around. This will help you find the best rates available. But before just landing on the lowest rate, make sure to evaluate any of the fees involved. Ask a lot of questions so that you are sure that it is a wise financial choice. But, if you are happy with your current lender then give them the opportunity first to refinance your loan as they may be able to offer you a better rate at this time.

Why to Refi

If you are looking to refinance in order to lower your debt and reduce your interest rate then it can be a very wise financial decision. However, if you have realized that your home is now worth more than it was when you bought it and you want to refinance it to gain additional money to pay for a car or a vacation then this could have negative financial effects on you. So make sure that your intentions in refinancing are good in order to reap the most benefits from this move.

If you are lowering your rate enough to pull cash from the value of your home then it may be a smart financial move. There are times when this type of choice could be wise. If you want to make improvements and renovations that will only add to the value of your home then you could take cash from refinancing to do so. But, this would only be wise if the interest rate of your mortgage is lower than what you could get with a home equity loan.

If you have considered all of your options and factors and decided you still want to refinance then it is time to look at how to refinance. Contact the lender that you would like to refinance with and fill out any required paperwork. You can either roll the fees to refinance into your loan or you can pay them upfront.

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