Home mortgage rates fluctuate. It’s just a reality of the markets. The good news is, savvy homeowners may be able to save some money by refinancing their mortgages at the right time. Not sure whether this is the right solution? Read on to find out about the signs that the time is right for refinance your housing loans with Dollarback Mortgage.
The Interest Rate Is About to Adjust
Most homeowners have adjustable-rate mortgage (ARM) loans, which means their rates will eventually go up, usually after an initial “teaser” rate period of one or two years. ARM loans are tied to benchmark interest rates. When they change, it’s common for payments to go up. The best course of action is to refinance the loan before that happens.
Homeowners Have Equity and Need Cash
Have a substantial amount of equity in the home and want to make some renovations or pay off a high-interest credit card? Mortgage refinancing can be a great, low-cost way for homeowners to get the funding they need. Borrowers with good credit can often refinance their mortgages with APRs of under 5%, which is much lower than the interest associated with credit cards or personal loans.
Improved Credit Score
Most mortgage lenders don’t require customers to have fantastic credit to qualify for their loans. However, buyers with low credit often pay significantly more in interest. Homeowners who have improved their credit since taking out their loans can take advantage of lower interest rates, even if their scores haven’t improved by much. Remember, seemingly small differences in monthly payments add up to substantial savings in the long run.
Monthly Payments Are Too High
Some homeowners opt to refinance after they have paid down a significant amount of their principals when their monthly payments become a burden. In these cases, borrowers should look into loans with longer terms. Of course, they’ll wind up re-starting the clock on paying off their mortgages, but that can be a decent trade-off if a borrower’s priority is to lower his or her monthly payments.
The Desire for Shorter Loan Terms
In many cases, homeowners obtain 30-year mortgages when they buy their homes to keep their monthly payments low. If their income increases, they may be able to refinance the loans with shorter terms. Those who have experienced increases in their income often go this route since it helps them pay off their mortgages faster, even though it means they’ll need to make higher monthly payments.
Wondering why more homeowners don’t just add more money to each payment on their current loans? Simply put, it’s not a wise financial decision. Replacing a 30-year mortgage with a 15-year mortgage can reduce interest rates substantially, which means more of the homeowner’s payments will be going to paying off the principal balance.
Get Help Finding the Right Refinance Loan
Since every homeowner’s situation is a little different, there’s no one-size-fits-all solution to refinancing a home loan. Working with a mortgage consultant is the best way to find affordable options that fit each customer’s unique needs. Reach out to a home mortgage consultant to find out about options and eligibility today.