The Scoop on RefinancingPosted at 10,Sep 3:29 am Blog Buyers Featured Refinance
A lot of people consider refinancing their mortgages to help with all their debts through consolidation to enjoy lower interest rates. Mortgage officers say that these people often overlook the additional expenses that are a part of this process.
Watch your terms and your rate
When refinancing your mortgage, do it only when the mortgage rate you qualify for is lower than your existing rate. It is possible to pre-qualify for refinance. Sign the refinance papers only when you’re sure that the terms of the loan, as well as the interest rates are the same as the ones originally quoted. If they change, ensure that it is still a good deal to go ahead with refinancing.
Consider your loan term
In an ideal scenario, a refinance shouldn’t add time to the loan. This can be achieved by opting for a shorter term that will increase the monthly amount you’ll pay. If the term is longer you’d end up paying more interest on your loan.
However, if you refinance your thirty year loan, your monthly payments will decrease but the loan term will significantly increase, causing you to pay a massive amount of interest throughout the loan. If at all possible, refinance to either a ten or fifteen year loan.
Never refinance to an adjustable rate mortgage
Another thing to look out for when refinancing is to make sure that you don’t opt for an adjustable rate mortgage. It is rather advisable to lock in the rates, as ARM will adjust itself to a higher rate in a couple years. It will raise your monthly payment amount abruptly, which will apply to your mortgage for the remaining term. Any home loan specialist will tell you that, opting for ARM for your refinancing will also keep you constantly worried whether the rates will rise again. So locking in lower rates can save you a ton of money for the remainder of your loan term.
Adhere to the refinancing rules above in Arizona, if you are seriously considering refinancing your mortgage.