The Do’s & Don’ts of Mortgage Refinancing – Our Guide
Getting a mortgage is the best way to seek funding for your new home purchase. Under the loan agreement, your lender pays for the property on your behalf, and you then have a monthly contractual payment (MCP) to settle with them until maturity.
Ideally, you’re bound to pay for the loan every month until it is paid in full. However, what if you can no longer keep up with your monthly payment, and you consider giving up your mortgage? Before you take the plunge in this decision, rest assured that there’s a far better alternative, and this is where refinancing comes into the picture.
Refinancing entails getting a new mortgage from your current or a different lender under a new loan agreement. Doing so is an excellent way to reduce your MCP, get a lower interest rate, extend your loan term, or take advantage of other features.
In this article, we’ll share with you some do’s and don’ts of refinancing:
The do’s of refinancing
- Switch from an adjustable to a fixed-rate mortgage: Various mortgages vary from one lender to another. For the most part, their interests are categorized into two categories: fixed and adjustable rates. Keep in mind that the adjustable rate is riskier due to its fluctuating feature, which is why it’s best to opt for a fixed rate so that you can better manage your finances.
- Factor in all aspects of your loan agreement: Sure, you may consider refinancing because of the attractive lower interest. However, know that not everything surrounds the interest rate. Besides that, you must also factor in your MCP, loan term, escrow account, and other features stipulated in the contract.
- Shop around and compare the overall cost: The best course of action before refinancing is to shop around for various loan options. Be sure to obtain multiple quotes and while you’re at it, choose the one with a better deal. That way, you’ll end up sealing an agreement with the right lender to ensure that you can still comply with monthly payments.
The don’ts of refinancing
- Easily get enticed by the adverts: You must not fall prey to attractive adverts saying that they offer a low-interest rate, as you may not know what they’ll charge you in the long run. The chances are that they have a very low interest during the first year and will recover after through your monthly payments. Likewise, be wary of hidden fees involved in the closing cost.
- Submit loan applications to various lenders: It’s impractical to send as many applications as possible, thinking you’ll have a higher chance of getting approved. The best step in this stage is to perform diligence by getting multiple quotes, comparing rates, and choosing the right lender. From there, go ahead and submit your application.
At this point, you now know what refinancing entails and how it can help your financial struggles. However, be sure to factor in the do’s and don’ts outlined above so that you’ll make the right decision when refinancing. Know your ultimate reason for doing this, and when you decide to take the plunge, make sure to get the best mortgage and close a deal with the right lender. Ultimately, you want to ensure that your refinanced loan will help you get by in the long run and own the property in time!
Are you looking to refinance your mortgage in Colorado? You’ve come to the right place, as we help clients get the right mortgage. Whether you’re pursuing a home purchase or loan refinance, check our rates, apply, or schedule an appointment with us today!