When your current mortgage loan seems unmanageable, refinancing can undoubtedly make your life easier. Essentially, refinancing is replacing your existing loan with another with different rates and terms. In most cases, refinancing reduces monthly mortgage payments, shortens your loan duration, or switches the type of loan you have.
Believe it or not, you can refinance your mortgage several months after purchasing your home. This is an excellent idea if rates drop drastically after you take out your initial loan. Before you decide to refinance, there are certain factors you need to consider.
Things to Consider with Early Refinancing
Let’s look at the specific things you should consider before you try to refinance your mortgage.
1. What Type of Mortgage Do You Have?
The timeframe in which you want to refinance depends on the type of mortgage you have. For example, you’ll want to refinance an adjustable-rate mortgage when the fixed rates are low. This can mean waiting up to five or even ten years. Some money lenders will revise the terms or rates of your loans if fixed rates drop shortly after you close on your mortgage.
2. What Are Your Plans?
Another thing to consider is how long you plan on staying in your home. If you are planning on moving soon, it’s not the best idea to refinance. Ask yourself how long you plan to stay in the home. Talk to your financial advisor to see if you plan on staying long enough to cover the cost of refinancing.
3. Do You Have Equity?
Your equity is the difference between the amount owed and the worth of your home. That’s why your refinancing options place high priority on the equity of your home when you apply for a new loan. The more you pay down your loan, the more equity you’ll have. In some cases, it’s best to way until you have a considerable amount of equity before you refinance. This will help you get the best rates.
4. What Is the Cost of Refinancing?
While it might seem like a great option to refinance, you need to consider the cost of the process. You’ll need to cover an appraisal fee and other fees to apply and complete the refinancing process. A possible payment penalty could also add to your refinancing costs.
5. What Is Your Credit?
Before you consider refinancing, you need to check your credit score. Your eligibility and rates highly depend on having a good credit score. This will ensure you have options for the best interest rates.
6. What Is Your Current Interest Rate?
If your refinance rate is not a considerable deduction from your current rate, you might want to rethink applying for a new loan. Remember, in some cases, refinancing extends the length of your loan. If your rates aren’t considerably lower with your new loan, you can actually end up spending more money over time.
7. Is It the Right Time?
Finally, you need to consider if it’s the right time for you to refinance. Just because you are eligible to refinance doesn’t mean you should. Talk to your financial advisor to determine whether refinancing is the right option for you.
Contact All American Financial Services Today
If you need to refinance in Lancaster, we’re here to help. Contact All American Financial Services to discuss your options.