6 Tricks for Refinancing Your Mortgage

September 3, 2018 by Susan Paige

Many homeowners spend a lot of time thinking about refinancing their home, but they are afraid to take the first step. If you have been waiting for the perfect chance to do this, today might be the best time to make your move.

Experts say that, in the foreseeable future, mortgage rates can’t go lower than they are now. This is very likely to be the case and it means that you should make a good plan and begin the process as soon as possible.

Refinancing involves taking on a new home loan in order to pay off your current existin home loan. This new mortgage you take out may have different features. For example, it might have a shorter or longer term.

In this article, we cover some of the best home refinance tips for you.

6 Tricks for Refinancing Your Mortgage

Take Care of Your Credit Score

If you are interested in having the best possible interest rate, with lowest monthly payments, you should repair your credit score.

Most mortgage lenders will want to see a perfect credit history in the previous couple of years. That means no unpaid bills, no missed payments on other loans you might have and not going over the allowed bonus of your credit card.

Having a credit score over 730 will get you the best possible terms. With all the modern adjustments to how loans are being distributed, it will also immensely improve your current credit situation.

However, having a credit score under 660 will bump up your monthly rates and final interest rate. You probably don’t even want to refinance your home until you get out of this situation.

We recommend you spend some time studying how to raise your credit score, until you’re ready for a new mortgage.

Choose the Perfect Mortgage Duration

If you can’t wait to start living your life free of mortgage payments, you might want to consider opting for a shorter loan duration.

The obvious downside of such a bold move is having to pay slightly higher rates each month.

However, the upsides are plenty. Not only will you get out of the ‘loan clutches’ in less time, you will also save a huge amount of money in the long run.

If you’re currently paying off a 30-year mortgage, switching to a 15-year mortgage with a lower interest rate will save you approximately 35% of your total fixed-price mortgage. This is easy to do because you can usually find a lower interest rate than you did when taking your primary loan.

Combine this with lowering the interest even further, by agreeing to pay the total amount in half the time. Now, you have yourself a great deal.

Explore HARP (Upside Down) Refinancing

The real estate market can get hectic and sadly, there is nothing any of us can do about it. If for some reason your home’s value has dropped since you purchased it, you might owe more money than your house is currently worth.

This issue can actually resolve itself, if the market takes another unexpected turn and the value starts going up. But there are other methods to lower your monthly payments.

HARP v2, the Home Affordable Refinance Program was introduced in 2016 and it’s designed for homeowners who currently have to pay more money than their house is valued.

Applying for HARP will make you available for better interest rates, thanks to the United States of America. Beware, lenders will still be able to turn you down, but we recommend that you don’t take no for an answer. Some are bound to accept you and it might be the perfect thing to help you get out of a slump.

APRs Versus APYs

When looking around for different loan interests, make sure to compare the Annual Percentage Rates, not the Annual Percentage Yields.

The reason behind this is that the APRs will accurately reflect how much you will be paying each year. On the other hand, some APYs might look better at the first glance but will actually cost you in the long run.

Don’t Use Your Mortgage to Take Money Out

It’s always a bad idea to refinance your home in order to get some money out. Sure, the cash will feel great at first, but homeowners usually regret making this move.

First of all, the interest rates are higher when choosing the option of getting paid when taking a loan based on your home equity. 0.2% may seem like a small difference, but depending on your fixed-price total, it can amount up to $50.000 of additional expenses.

The second reason is that your overall mortgage will get bigger, even if you managed to find a similar interest rate.

Think carefully about whether you really want to do this. It is rarely a good move, since it’s such an easy way to borrow money based on the value of your home. For example, using the cash to pay off a debit card debt or another loan you possibly have on your hands.

Build Relationships With Banks

Homeowners have reported not being able to find a lender to refinance their mortgage, even those who had enough assets and a good credit score.

This situation can occur if your mortgage is extremely high (over $1M) and the lenders are simply afraid of taking you up on your offer.

By making a deposit, or even moving the majority of your assets to their bank, you can both show your financial strength and build professional trust between the two parties.

The Bottom Line

Refinancing can be a very efficient process of saving money, or even making some cash. This is only if you make the right decisions. To help you find the right mortgage, use this online refinance mortgage calculator tool from Lowermybills.com.

Getting a higher credit score, choosing a great loan plan with a shorter lifespan and taking your time to find the best possible lender are just some advice we have provided. Follow them and you are on a sure path of refinancing your home while saving respectable amounts of money along the way.


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