The current market rates to refinance a home are lower than they’ve been in a very long time, so it would make complete sense that the idea of refinancing a mortgage loan would be made more attractive, especially to those who might have decided against one in the past for whatever reason. Even though it seems like it could be a win-win situation for those considering refinancing, you should first take into consideration the overall costs associated with refinancing a mortgage loan and not just how much your interest rates will lower. It might seem like a grand dream to be able to brag to your friends about how low your interest rate is, but if the transaction doesn’t make sense, you could be ultimately shooting yourself in the foot for no good reason. Read on to find out more!
What is Refinancing?
In the simplest terms possible, refinancing a mortgage loan means to take out a new mortgage loan to pay off your old one in the hopes that you’ll be rewarded with a lower interest rate. This can be a great thing, but the appraisal, origination and other additional fees can end up making the refinancing process more costly than most people realize.
- Don’t make a rushed decision to refinance for the particular benefit of a lower interest rate. You could potentially end up spending a whole lot more on the process than you take away in overall savings.
Rates Are Lower Than Ever
It might be true that rates have never been lower than they are right now, but that doesn’t mean that you’re likely to get the best rate there is. Taking a close look at your finances and the specific situation that lies in front of you will be the best indicators to let you know if refinancing a mortgage loan is the best idea for you. If it is in fact the right time for you, you will most likely knock off at least a few points from your current interest rate if all of your ducks are in a row, and anything is better than nothing. Those savings will be gladly welcomed for most people paying down hefty mortgages!
- Rates are lower than ever, and they won’t be changing overnight or in the near future with the way things have panned out thus far. Do your research and think it over for a good while before you make any major moves.
Refinancing in Historic Times
Yes, the mortgage loan market is in the depths of historic lows as we speak, but that should not be the sole reason you’re planning on refinancing a mortgage loan. The market has certainly bottomed out and lenders realize that, so they don’t have too many reservations about refinancing people with good jobs and good credit. If you’ve got a great community bank or independent lender to go to, you can get refinanced in record time these days. With all that being said, you can expect to be bringing a lot more documentation to the table to prove that you can handle the onset.
- Look to lending from an independent lender or a good community bank. They are sure to get your refinanced mortgage loan through the loops much quicker than a big bank with other “more important” transactions hanging in the balance.
Can You Afford It All?
You should certainly exercise caution before moving forward with refinancing a mortgage loan. You have to identify your true reason for wanting to refinance: are you just in it for a lower interest rate or are you more interested in a shorter mortgage term or a lower monthly payment? Once you’ve drilled yourself about it and went over all of the information time and time again to be sure, you should head to your lender to have your final questions answered. Each person that goes into refinancing a mortgage loan has a unique financial situation that requires unique interaction and clarification. The lenders you have in mind will be more than happy to sit down with you for a discussion about your choices and options even if you’re not ready to commit to the idea right away: they might make a loyal client out of you some day in the near future if they treat you right.
In short, refinancing a mortgage loan at this point in time can be a very rewarding move. If you’ve got the means to manage it, you will probably be very happy with the results that you come to in the end. Make sure that you’re committing to the idea for the right reasons because refinancing is not a miracle cure for your woes by any means. Refinancing takes quite a bit of money to save a little money and you want to be perfectly sure that it’s all worth it for you in the long run.