Refinancing your mortgage is an alternative way of paying off a loan, often a mortgage loan, with lower interest rates and lower payments. Refinancing your mortgage is not simply a second mortgage. It is new money that will help you pay off your original mortgage, but often with better terms.
While this probably sounds fantastic, it is not something everyone should consider right now. Before you take the plunge, be sure that you are ready to refinance your mortgage, and be sure that it is the right time for you to change the terms of your original agreement.
Read the four tips below to see if you’re ready to refinance your mortgage.
You Have a Good Loan Record
Before you consider refinancing your mortgage, make sure you have a good loan record. If you haven’t had any late payments for twelve months, then chances are you’ll get a low-interest agreement.
However, if you’ve had trouble keeping up with your monthly payments, and have a poor credit rating as well, it is unlikely you’ll be given a new term that beats your present agreement. Lenders want to ensure that their clients return their capital, and a poor financial history does not make you an ideal candidate for any lender.
The Rate of Inflation is Right
Don’t disregard the significance of inflation. As inflation determines the interest rate, you will want to wait until the inflation rate falls in order to get lower interest rates. Waiting for a lower inflation rate can save you thousands of dollars in the long run.
There are Good Terms
In addition to a low-interest rate though, you will want to make sure that there are other savings. Before you change your current mortgage loan agreement, check that refinancing your mortgage will provide you with lower overall rates, or that you will be able to pay off the loan in a shorter amount of time. You need to compare the total costs with the total savings to see if it really is a good switch for you at this time.
The Value of Your Property Has Increased
It is not a good idea to refinance your mortgage if the value of your property has gone down. This could mean that the amount you are offered to refinance your mortgage could be lower than the original mortgage loan amount.
Additionally, once the value of your property has increased, you have the option to take a loan out on the equity of your home to help you pay for something else. Doing this can help you pay off other high-interest debt, such as credit card debt or auto debt, or it can help you pay for post-secondary education.
If these four pointers are relevant to your current situation, then you’re ready to refinance your mortgage. While this is a great way to better manage your money, be aware of penalty clauses, or provisions, that could negatively affect your savings.
It is a good idea to consult with a financial advisor first to ensure that you’ve picked a new term that will not be a hindrance to your bank account.
Now May Be The Time To Refinance Your Mortgage
Loans are intimidating and sometimes you may find yourself in a position where refinancing may be something to consider, such as when mortgage rates are falling and you currently have a fixed-rate. One thing is certain; making such a change should not be taken lightly.
Refinancing is a serious decision that should generally be done no more than once in the lifetime of your loan or you can end up paying more in the long run than you are saving today. We’ll explain a few things you may want to think about before making a decision to change your current mortgage.
Consider the Life of Your Home and Equity
Before refinancing, it’s important that you ask yourself how long you plan on living in your current residence. There are (in most cases) closing costs associated with refinancing and if, for example, you are going to be paying a few hundred dollars less per month with a high closing cost of a few grand and you end up moving out of your home in six months, then you are going to be paying far more out of pocket than if you would have stuck with your initial mortgage.
In most cases, you are going to need to have at least 20% equity in a home to get the best deal when it comes to refinancing. If you have lived in your home for quite some time and have accumulated a large amount of equity, you may be able to refinance for much lower than what the original loan sum was.
Those lower monthly payments can make a drastic impact on the financial comfort of your family. Another thing to think about is whether you truly want to extend your mortgage out to, say, 30 years – placing yourself back at square one or if you can handle a 15-year mortgage instead.
If you have already knocked a large amount of money out of the total, your family could be paying far less than they would have if you added a few more years to your loan.
Taking Advantage of Great Opportunities
There are times where life doesn’t just hand us lemons, but a pre-made carton of lemonade. In order to benefit from such situations, you have to be able to recognize lemonade when you see it.
What we mean is, not everyone is lucky enough to have outstanding credit but when you do, there is an abundance of mortgage opportunities available to you. If you are able to find a mortgage with a much lower interest rate, it may be time to take the plunge.
Of course, you must consider if there are going to be closing costs (sometimes there aren’t). Instead of extending your loan, you may be able to take the additional money you are saving along the way and place it towards the principle of a smaller loan.
This could potentially mean paying off your mortgage quicker than you would have originally if you’d stuck with the longer payment period.
How a Refinance Can Help You Manage Debt
A home can be a great investment. Its investment value can be realized not only when you sell it, but while you still live there. Refinancing a home mortgage can help homeowners with a variety of financial problems. If you are late on other bills or you just have more credit card debt than you are comfortable with, a refinance may help you get into a situation where you feel you are able to handle all of your bills.
- Refinancing can result in a lower interest rate. Having a lower interest rate means paying less over the life of the mortgage. For the first few years of a mortgage loan, most of the monthly payment is applied to interest. If you are paying less in interest, you are naturally paying more in principle. Many people choose to use the lower interest rate to keep their payments low, others shorten the life of the loan so it can be paid off sooner.
- Lower interest rates generally result in a lower monthly mortgage payment. If you have equity in your home, a refinanced mortgage will likely result in lower payments. Having a lower monthly mortgage payment will allow you to pay off other high interest debts, thus helping you raise your credit score and qualify for low interest credit. If you have other debts, it is important to make a personal budget so you will not get into financial trouble again.
- Refinancing can get you cash to consolidate your debts if you have significant equity in your home. You don’t have to use the cash for your other debts, but if you have outstanding bills, a cash-out refinance may get you the money you need to pay them off and stop the calls from the creditors. It is a good idea to consider paying off all debts that have a higher interest rate than your mortgage with the money you get from your refinance.
- Cash from a refinance can be used for anything. That cash can be used to pay other bills, remodel or otherwise upgrade your home, or to pay cash for something you would have normally bought on credit. If you plan to sell your home in the future, making home improvements may increase the value of your home.
- Refinancing can extend the life of your mortgage or shorten it, whichever works best for your situation. There are definite tax advantages to having a mortgage loan. The interest you pay on a home loan is tax deductible. However, many people prefer to own their home free and clear, without a monthly mortgage payment. Whether you want to extend or reduce the term of your current mortgage, refinancing can provide a solution.
If you are having a problem keeping your bills current and you own a home, refinancing your current mortgage may help alleviate your financial stress. A mortgage broker or a bank’s loan officer will be able to discuss your personal financial situation with you and help you find the best mortgage to help you meet your overall financial goals.
Adverse Credit Secured Loans – A Good Option for Refinancing
If you are a homeowner with a bad credit history and you are not able to deal with the huge monthly payments for your home loan, then you are in serious trouble. There are chances that you might lose your house to foreclosure.
What are you supposed to do? There are options available which can help you to get rid of these problems and you can actually save your property from foreclosure.
There are several lenders who are offering adverse credit secured loans to those who are facing the challenge of blemished credit history. The best thing to do before consulting with these people is to cut costs. It may sound difficult but in reality, most people waste money every month on things that are not necessities.
Sit down and write it all out on paper what your total income is and what the necessities are required monthly. If there is a variance then you may need to take action and apply for this type of loan.
Ease Your Financial Burden With Adverse Credit Secured Loans
These adverse credit secured loans will help you to take off some of the financial burdens from your shoulders and give you a chance to start anew. When you opt for a secured loan for lower credit score, you will have the money that you can use to close the existing bad loan account and pay off your first creditor completely.
This will give a boost to your credit score and thereby repair your credit history. You can also use the money to repair your property so that the value of the property appreciates over time.
Reduce Monthly Payments
Adverse credit secured loans can actually reduce your monthly payments in a number of ways. You can opt to have a longer repayment period for the second loan that you are taking and this will reduce the monthly repayment burden.
You can also opt for a fixed rate loan which will protect you against the market fluctuations and you will stay protected against insanely high interest rates. This will reduce the monthly repayment burden considerably.
Secured loans for bad credit are easy to attain because there are no credit checks required and the documentation part is also considerably low which makes approval and dispersal of the loans faster.
This means that you can have quick access to the money and use the same to pay off your previous lender in full to avoid further damage to your credit history. Many people choose to consolidate all of their debt once approved.
This really should be a one-time thing so if you are needing a new car, or looking upgrade appliances and other necessities you should look at adding it all into one payment. Use the credit loan as the one stop shop for all of your debt needs.
Pay off other credit lines, credit cards, loans, and purchase what you need and you have one payment per month. This will allow for much easier budgeting and you will be sure to never miss a payment.
Rebuild Your Credit History
Debt has quickly become the big four-letter word for most people. Financial ruin is another popular phrase that pretty much all of us have experienced or know someone that has. What should people do that need to rebuild their credit? Adverse credit loans are quickly becoming the lifesaver for many.
Rebuilding an individual or family credit history has, up until recently become rather easy. This is mainly because of the availability of these types of loans. These loans are available with several lenders.
However, some of the lenders will actually help you to rebuild your history of credit while others will consider only servicing by providing secured loans for bad credit. There are several things that you need to know about your adverse credit secured loans. These are mentioned below:
First: Taking out a secured loan for adverse credit from a bank will add more points to your credit history compared to a loan from other financial organizations. The reason for this is that loan companies actually charge extremely high interest rates and hence, they easily approve any loan application irrespective of the credit history of the applicant.
Since most of the consumers are not aware of the process of credit rating, they end up taking loans from other financial organizations. Often people choose the easiest and fastest way to get the cash in their hand. This is a very unwise decision, and often one that will lead to financial ruin.
Second: Irrespective of the lender that you select for your adverse credit secured loans, your credit rating will also depend on the factors like stability of your job, how long have you been a borrower, stability of your residence, history of your payments, total outstanding balance of your previous loan, time since your last delinquency and more.
There are several financial companies which have their own internal scoring system where they weigh factors such as the residence type, the ratio of debt to income, your experience with savings and checking account, etc.
These can either benefit you or potential hurt you. This is why you need to take care of these factors before you apply for any secured loans for adverse credit so that you can rebuild your credit history properly with the adverse credit secured loan that you are taking out.
Ensure Correct Credit History
You need to make sure that your credit history is correct before you consider taking such a loan for yourself. If not, you need to contact the credit bureaus and fix those errors. Moreover, you need to have a steady income flow which can help you to repay the adverse credit secured loan.
Timely repayment of this second loan will ensure that your credit history is rebuilt. If you have exhausted all options, and your credit is just in such disarray that you feel you will not qualify you may need to consult with a co-signer.
This would provide the lender with the assurance that you will not default on the payments. Once you have established a good rapport with the lender and have a solid repayment pattern you can often ask that the co-signer be removed from the loan.
Tricks and Tips to Lower Mortgage Interest Rates
Here we explain tips to lower mortgage interest rates. If you own a property already you should consider a mortgage refinance to help you overcome the shackles of high rate mortgages.
You probably are paying a fixed interest rate on your existing mortgage, and with the market interest rates taking a southward journey, you feel that you are unnecessarily paying high mortgage interest rates.
However, there is no point worrying, as mortgage refinance is the right option in your situation, which can help you to switch to more viable mortgage finance options.
What is Mortgage Refinance
Mortgage refinance is a term used to pay off your old mortgage with a new mortgage loan. People normally go for this option when the market interest rates have reduced considerably. You can also go for mortgage refinance to lower your payments or get cash out of your home equity.
If you have an excellent credit history, you can go for 100% mortgage refinance where you are allowed to borrow against your equity. If your credit history is not up to the mark, you will have to apply for a line of credit or work with a sub-prime lender for your mortgage refinance offer. With the 100% mortgage refinance, you can take out all the equity of your home.
The point to consider here is that as you take out your equity, your interest rate will increase. The lesser the lender has in the property, the higher interest rate he is likely to charge. However, the rates will be lower than a second mortgage, should you decide to take one.
Tips to Improve Your Application for Mortgage Refinance
Lenders are mainly concerned about your repaying capacity while considering your mortgage refinance application. They may be interested in knowing the details of your income, cash assets, and credit history if your equity is low. If you have other borrowings such as credit cards and student loans, your borrowing power reduces considerably.
Therefore, reduce your financial liabilities to the maximum possible extent. With lower or no liability at all, you can drive home a great bargain by reducing your interest rate on the refinanced mortgage.
The market is full of lenders, and they need you more than you need them. You can strike a good mortgage refinance deal in a competitive environment. Shop around and compare the mortgage refinance terms offered to you. The lowest interest rate offered for the mortgage refinance deal is not necessarily the best mortgage refinance option.
There could be some hidden charges involved. Since the mortgage is a long-term relationship, make sure that you deal with a reputed company for your mortgage refinance.
Read also: The Different Types Of Mortgages in Europe