When is it convenient to refinance your mortgage?
It is not always appropriate to refinance your mortgage but in the following cases it may be beneficial:
- 1. Lower the interest rate:
Reducing the interest rate will reduce your monthly payment, saving you money every month. In addition, it can help you build equity faster if you choose to continue to pay the same monthly amount
- 2. Converting an adjustable rate mortgage to a fixed rate mortgage.
While some adjustable interest rate began by offering low interest rates and then become fixed, periodic adjustments can result in much higher interest rate than the prevailing fixed rate. Therefore, refinancing an adjustable rate mortgage into a fixed rate could result in a lower interest rate and avoid the risk of future interest rate increases that could cause unplanned financial stress.
- 3. Debt consolidation: Refinancing to consolidate debts can be a good plan if a homeowner has equity in their home and is currently paying high interest rates on card loans, credit cards, etc. It can effectively reduce a homeowner total monthly interest charges and overall payments.
- 4. Cash out refinance to pay for college, home improvement or other high cost items.
If there is equity in the home, this can be a valuable resource in time of needs, when a major expense is encountered. In situations like this a cash refinance may be a smart option.
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If one of your goal is to become a homeowner, there is no better time than know how to prepare. Follow these steps and you will get you dream come true:
- 1 - BUILD + MONITOR YOUR CREDIT: If you want to buy a home, first knowing your credit score is a good place to start. If you credit could use some improving, take time to build it. Make sure you are making payments on time and not racking up more debt. A new car or big screen TV may be tempting, but any new charges can affect the interest rates(s) and amount you qualify for.
- 2 - GET PREQUALIFIED: Prequalification helps you understand how much house you can afford. It also outlines your loan options and puts you in a great position with sellers, who often prefer prequalified buyers. It is not a lengthy process and will save you time if you only look at homes within your pre-qualified budget.
- 3 - SAVE + BUDGET YOUR MONEY: Saving and budgeting go hand in hand. If you do not know where to begin, start by creating a budget. Make a list of all your bills and expenses to determine how much you can put aside. Think about extra expenses you can do without (dining out every night, subscription services, etc.) and allocate those funds to your savings account. Once you are prequalified, include your potential mortgage payment in your budget, to help you prepare for the cost ahead
- 4 - DO YOU RESEARCH: Before you buy your dream home, look into getting a home warranty. Making a down payment and paying closing costs can put a big dent in your savings, which could put you in a tough spot if your home requires any major repairs in the future. Home warranty can cover major repairs, so it's important to do your research and read the fine print.
Before you buy your dream home, look into getting a home warranty. Making a down payment and paying closing costs can put a big dent in your savings, which could put you in a tough spot if your home requires any major repairs in the future. Home warranty can cover major repairs, so it's important to do your research and read the fine print.
