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Thursday, December 5, 2019

Should You Refinance Your Mortgage?

Maybe you bought your first home together before the wedding and have been making payments on it for some time now.

If you've been a homeowner for a while, you most likely have a mortgage and are making regular payments to a broker, a bank, or a lending institution. But did you know that the rate that you pay for that loan is not fixed forever? Depending on lending rates, land values, and interest rates, you could possibly work out a way to pay a lower rate, or extend your loan by a few more years if you are going through a tough time.

One of the ways to manage your mortgage is through refinancing. This is basically trading one loan for another, which means replacing your current mortgage with a new one-preferably one with more beneficial terms. For some homeowners, the move to refinance has managed to save them hundreds of thousands of dollars. For the unlucky few, though, a miscalculation in timing could mean that a refinancing extends their loan at the very least.

The Right Time to Refinance Your Mortgage

So when is the right time to think about refinancing your mortgage loan? Is it something every homeowner with a mortgage should consider, or is it a special case that applies to certain cases only? There's no easy answer to these questions, especially if you're trying to navigate the financial ins and outs by yourself.

Working with a Mortgage Broker

Try to work with a mortgage broker who originally managed to secure your initial mortgage. A broker can intercede with mortgage lenders on your behalf. For example, you need a mortgage lender in Boston. Your mortgage broker will go through their certified partners and gather the necessary documents. They will work with you to complete all the information needed. They will also conduct the credit history check and do all the other tasks related to applying for a loan. They will try to make sure that you have the best available rates for your loan bracket.

But before you go hunting for a real estate mortgage broker, consider the reasons you have for refinancing and if it is the right time for you.

Lower Interest Rates

One great reason that might lead you to refinance your current loan is the occurrence of lower interest rates. Trading an old loan with a bloated interest rate for a fresh new loan with better terms and interest rates is always a good deal. The rule of thumb is to refinance when current rates drop to one to two percent below the rates that you have. Another indicator that you should consider refinancing is if your property values go up. This will give you sufficient leverage to refinance on more advantageous terms.

You might consider refinancing if your credit score has improved. We all know that loan rates are higher when you are considered more of a risk. Some homeowners take on an adjustable rate mortgage (ARM) to help keep rates stable for a fixed time. However, with an ARM, one is never sure how the interest rates will move. They may move higher as different economic factors come into play. With an improved credit rating, you could negotiate for a better fixed rate. This will afford you peace of mind and might even pave the way for better situations further down the road.

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