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Refinance Your Loan: When to Do It?

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By : Roby Hicks    99 or more times read
Many are refinancing their loan because they feel that it will help resolve their financial concern. There are several benefits of refinancing. This will allow the borrowers to choose a better term and interest rate to make their monthly obligation more affordable. But when is it ideal time to refinance your loan? Is it always advisable?

You need to learn to consider essential factors before you consider refinancing your home. What are the things you need to check?

Check the interest rates in the market

If you want to lower your monthly payments, make sure that the interest rate offered in the market today is lower that your current interest rate. Ideally, it has to be 2 points lower than your current rate to save more but you can consider at least 1 point, depending of the amount you will be able to save. There is no point in refinancing your existing loan if the rates offered in the market are higher. It is like working towards increasing your monthly obligation.

Make sure that you have a good credit score

If you want to refinance your home, see to it that you have a good credit score. This is essential if you want to qualify to the low rates offered by the lenders. if you have applied for a mortgage loan with high interest rate because of a bad credit, rebuild your credit score so that you can refinance it with better terms after three years or so.

There are various ways of improving your credit score. One is by reducing the extensive use of your credit card. It is also essential that you make your payments on time. Late payments will be a mark down from your score. You should also improve your debt-to-income ratio. Lenders will offer better rates if they see that you are more likely to make the payments.

See if you can improve your mortgage term

Aside from the interest rates, you can also refinance your mortgage to be able to pay your loan faster. If you have a 30-year mortgage loan, you can refinance it to be able to pay it off in fifteen years. This is possible if your income has recently increased or that your spouse has started working and is starting to contribute greatly to the overall income of your household. Being able to pay off your mortgage earlier will reduce the likelihood of foreclosure.

Change your Adjustable Mortgage Rate to Fixed Mortgage Rate

Most of the time an ARM will have higher rate than the fixed rate mortgage. Today, interest rates are low. This is why it is recommended that you refinance your home and lock it in a low interest rate. However, you have to make sure the fixed rate is lower than your current rate in order to save more.

You will also need to find the right kinder. Compare the rates and the terms they offer. Before refinancing, make sure that you have a good score. This way, you will qualify to the better rates and terms.
Check out the Avondale Homes for Sale. Visit the Sun City Real Estate and the Goodyear Real Estate as well.

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