When you’re ready to refinance your home, you can get a lower interest rate and reduce your monthly payments. But it’s important to pay attention so that you don’t accidentally negotiate away a good deal!
Here are six best refinancing tips for homeowners:
1. Research Lenders
There is a lot of information available online about mortgages and loans, but not all of it will apply to your situation. That’s why learn to compare different lenders’ rates and offers. This way, you can sort through the numbers with ease and make sure you’re negotiating with someone who will give you the most favorable terms.
When researching for mortgage lenders, you should consider the following factors:
- Interest rate
- Fees
- Terms of the loan
- Length of the loan
- Payment schedule
- Prepayment penalty
Note that you don’t have to your current lender if you want to refinance. You can always shop around for a better deal.
2. Negotiate
Don’t be afraid to negotiate mortgage loans with your current lender or with lenders at other institutions. Before applying for a loan, research the rates of multiple companies and try to get the best deal possible. Once you have prospective offers in hand, you can use them as leverage during negotiations.
It’s important not to break any terms of your mortgage agreement before refinancing, though. Additionally, you still need good credit. Ensure that everything is paid on time while your rate is locked in. That way, if the worst happens between now and when you refinance, you won’t pay more than necessary.
3. Balance Your Priorities
Before you apply for a refinancing deal, figure out exactly how much money you will be saving and what your priorities are. Are you just looking to lower your monthly payments, or do you have other financial goals? Are you looking to make extra payments to pay down the principal, or would you like to add more money on top of your minimum?
To determine how much money you will be saving with each lender, use an online calculator. If you’re paying off credit cards or other loans faster, then refinancing can save a lot of money that could otherwise go toward these debts.
Although refinancing has many benefits, it is not ideal at all times. Postpone getting refinancing if you need more cash on hand for things like medical emergencies, large purchases, or higher-than-expected expenses or the current interest rate is high.
4. Use Caution with Fees
Refinancing involves different types of fees. These include the origination fee, appraisal fee, and other closing costs. Some lenders may take them out directly from your refinance loan, which means you’re actually getting less. Others may demand that you pay this out of pocket, which you may not be able to afford.
Even though refinancing may save you money in the long run, make sure that it won’t cost too much upfront. To find out, go back to tip#1: compare lenders.
Not all lenders will be transparent about their fees, especially since they can be a percentage of an amount. However, you can always ask for a quote to give you an idea.
5. Read Customer Reviews
When shopping around for refinancing lenders, take your research up a notch by reading customer reviews. These reviews come in handy when you want to know the reputation of the company, how good their customer service is, if they are too pushy or not pushy enough, and more.
You can find these reviews online, usually on third-party websites, like Yelp. But you can also use social media. Go to the lender’s social media accounts and read what others have been saying about them. If you need more information, reach out to the commenter.
6. Know the Different Types of Loans
Refinancing can come in different forms and each one may have its own terms. For example, there is basic refinancing where you refinance an existing loan for a new one. Then there’s cash-out refinancing, which allows you to borrow extra money from your home equity.
This type of loan usually comes with high interest rates as well as fees because it involves more risk. That said, if you’re looking for a large sum or you need an emergency fund, this could be worth considering. Just make sure to take your time and understand everything involved before signing on the dotted line. This way, you’ll know what to expect and won’t fall victim to any scams or predatory lenders.
Refinancing is a good way to save money, but you need to know how to do it properly. If done right, refinancing can allow you to pay off your debts faster and free up more cash for other financial goals.
