For many homeowners who are on adjustable rate mortgages, this is the ideal time to refinance. An increasing number of ARM holders are opting for fixed rate mortgages as they will know exactly what their payments will be for the duration of the mortgage. Much of the current problems in the mortgage market stem from the resetting of rates from the initial low teaser rates to much higher rates. The most sensible approach for any ARM holders is to start the refinance process a long time before the rates actually reset. Don’t wait until the last minute, take action now and prepare, as rates could soar in the future. There are a few things to consider before making the decision to refinance
Don’t wait for interest rates to come down.
In the current mortgage climate, rates are very unpredictable and are subject to fluctuation. If the rates look attractive then you should refinance. Even if rates go down further later, you can always refinance again. Also, if you haven’t finalized the loan and the rates go down further, you can always change mortgage brokers. Its best to refinance as soon as you think that the rates look to be in your favour because if they rise significantly, you’ll be glad you locked in to the initial rate.
Make sure you use local mortgage brokers to get refinance rates.
Local mortgage brokers will be aware of the local housing market, local lenders and also the local practices. They will be able to put you in touch with local lenders who may offer more favorable rates.
Do your research.
If you’ve been paying your mortgage for several years, the amount saved every month by refinancing might not save as much as you think. In fact, it usually costs far more than individuals realize.
if you’re 10 years into your mortgage loan, refinancing your existing loan will mean that you start over on the repayment of that debt. You may save money by lowering your monthly payments but once you refinance, you’ll be paying that loan off for an additional decade.
Be sure to get a “good faith estimate” and “Truth in Lending statement” from your mortgage broker before jumping into a new loan that could cost thousands of dollars (if not hundreds of thousands) over the life of your new mortgage.
Many homeowners who find themselves in financial difficulty now could have avoided the situation by doing thorough research. For most people, a mortgage is the single largest financial transaction they will make in their lives and it pays to do your homework. Initial teaser rates may sound attractive but you need to work out if you can afford the repayments when the rate resets at a higher mark.
Lindsay Kaplan has been providing mortgage refinancing tips for over 5 years, with experience in the United States mortgage and refinance market. Browse through many more mortgage articles at Loansplanet.com.
Tags: Debt Help, Home Equity, Loans, Mortgage, Refi, Refinance, Refinancing
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