Refinancing is a great way to save money. However, if you really want to take advantage of what it has to offer, then you need to learn how to maximize mortgage refinance savings before starting the process.
Most people usually accept the first offer their mortgage holder makes. It’s a natural reaction, since no one really wants to go through the stressful and time-wasting refinance process. But this is a mistake. If you refinance because you want to save money, then chances are that there’s an even better offer out there.
Here’s what you need to know in order to maximize mortgage refinance savings:
1. Know everything there is to know about your current loan
Before refinancing your mortgage, you have to find out everything there is to know about your current loan. This will help you see how much you can save and what are the minimum acceptable loan terms you’ll want to negotiate. Also, it can show you if refinancing is a good idea or not. Don’t forget the costs that come with it! If you’re not careful, you could end up losing money, instead of saving.
2. Check your credit score
Your credit score is extremely important for your financial health. And, if you didn’t know it yet, it also influences the refinancing process. A high score can earn you lower mortgage rates, while, with a low score, you should brace yourself for some unpleasant surprises.
Review your score to check for any errors and then make sure you remove them. You might also want to see if you can’t improve it. Any improvement, no matter how little, can help. Click here to see how you can take better care of your credit health.
3. Shop around
If you really want to save, then you have to see at least three different lenders. Don’t just accept the first offer you get. Even if it looks good, chances are you can find something better that can help you save more.
4. Avoid cash-out refinancing
It’s tempting to want to turn your home’s value into cash but remember that this actually lowers the value of your property.
5. Get rid of mortgage insurance
Mortgage insurance is an added expense that only helps your lender. To remove it you must be up to date with your monthly payments and you have to reach the date when the principal balance of your mortgage is scheduled to fall to 80% of the original value of your home.
6. Evaluate your refinance strategy
If you have an adjustable-rate mortgage and you feel that rates may rise, it might make sense to change to a fixed-rate mortgage. Or, if you have a fixed-rate mortgage with higher rates, you might want to move to an adjustable-rate mortgage with lower rates. By taking a closer look at these scenarios, you’ll be able to figure out what type of mortgage is best for you.
