One of the biggest reasons people refinance today is because they're looking for more money. Whether its to remodel your house or reduce your interest rates, it all comes down to the same purpose. Although the basic process of refinancing is simple, there are many variables involved with getting the best deal. Here are a few basic tips to refinance a mortgage:
Brokers Make Refinancing a Mortgage Easier
Refinancing a mortgage for any reason can be a significant task. There are many variables involved and you will likely encounter numerous terms with which you are not familiar. For this reason and many others, a mortgage broker can help to ensure you receive the best terms. In this way the broker will often pay for themselves.
Shop Around for Loans at Other Banks
We all have a bank that we've been with for years. This is often our first stop when we think about refinancing a mortgage. However, you shouldn't be afraid to shop around at other banks â even if it's just to come back with a pricing list to your own. This ensures you receive a loan with the lowest possible overall expenditure.
Fortunately, the Internet has brought with it many tools to help in this area. There are now specialized 'loan comparison search engines' which let you see multiple loans and banks side by side. These make it possible to obtain a great loan in a fraction of the time previous to the Internet.
Check for Hidden Fees
The old saying: "if it seems too good to be true, it probably is" definitely applies here. Recently there have been a rash of mortgages with unbelievably low interest rates offered by banks with minimal background checking. Often, these loans have low interest rates to start out, but then either balloon at the end with large fees or become much higher interest later into the loan.
Check the Housing Market
Knowing the local housing market for your area is beneficial towards receiving a low interest rate. Usually the best time to refinance for lower interest is in a 'sellers market' â one that causes the value in your house to increase. A buyer's market is good when you are purchasing a house, but it doesn't necessarily provide you with the best interest rate for a refinance.
Decide Whether You Want Points
Paying money up front in the form of 'points' helps to reduce the interest rate of your loan over time. Each point is worth approximately 1% of your mortgage. If you can afford to pay up front, this usually makes the most sense. It's also helpful for longer loans, as you will pay less overall after interest is factored in.