Refinancing has become extremely popular in this post Brexit world, with rates for home loans now down to record lows. But, as more and more Americans are considering mortgage refinancing, it’s important to think about how much you can save. Here are four factors that have an important impact on mortgage refinancing.
Your plans
You need to take into account your plans when thinking about refinancing or what programs to use. Ask yourself these questions:
- Do you plan to sell your home or turn it into a rental?
- Does your current loan include a pre-payment penalty?
- Do you have the necessary funds to cover closing costs?
Answering these questions can save you a lot of money.
Interest rates
Interest rates dropped after the Brexit vote, and this is good. But it’s also a warning. Market conditions, credit rating, loan value and loan length, all of these things influence interest rates. You can’t predict what the future brings but you can pay attention to specific events and see how they influence interest rates.
You should also check your credit score before you go out shopping. A higher score means a lower interest rate, so, if you find any errors on your report, make sure you fix them before you sign anything. Take a look at the other factors that influence interest rates. You could save a lot of money.
Refinancing costs
These costs can mean the difference between a successful refinance and a bad one. A lot of people don’t take them into account when refinancing their mortgages, and they end up losing a lot of money, with the new loan actually costing them more than the old one. If you’re looking to refinance your mortgage, look at all the costs, put them together and see if it’s still worth it.
The loan-to-value ratio
Your loan-to-value ratio shows how much mortgage you owe in relation to how much your property is worth. As the value of your home changes over time, it’s important to appraise it before you agree a new deal. If the market value of your property is less than the loan principal, you may have trouble refinancing. But you can also take some steps to improve your home and increase its value.
