How to Refinance Your Mortgage – Mortgage Refinancing Tips and Tricks
With the recent financial crisis hitting the housing market hard, more people are looking for ways to reduce their mortgage payments. Many homeowners have been left with large debts, and the only way they can make their monthly payments is by refinancing their mortgage. Here are some tips on how to refinance your mortgage.
The first thing to consider is your current interest rate. If you are currently paying more than half of your income towards your mortgage, you should consider lowering your payment to save yourself from further debt. Usually, you will have a couple of options.
o Locate an alternative mortgage that will allow you to continue paying the full interest rate. Check into a fixed-rate mortgage if your current interest rate is very high. Fixed-rate mortgages typically offer lower payments, and you can always switch to a variable-rate mortgage if you can afford to pay a little more each month.
o Find a lender who will offer you a variable-rate mortgage instead. The higher the interest rate you pay, the more money you will save. This could be a good option if you want to stay in your home and do not want to leave it to the mercy of a lender.
o A homeowner’s loan has a longer term than a fixed-rate mortgage. Most home equity loans will be for 30 years, while fixed-rate mortgages are usually only available for five or seven years. In these cases, if you need a longer repayment period, you can get a longer loan.
o Before you refinance a mortgage, find out what the current rates on the mortgage you are considering are. This can be done online. Many mortgage lenders offer free information via their websites.
o Consider the best loan type for your needs. There are three types of loans available: a home equity loan, a second mortgage, and a loan from a bank. The lowest mortgage rates may be found through home equity loans. You can use the equity of your home as collateral and the lender makes a small loan to secure your loan.
A second mortgage may require a higher loan-to-value ratio, and there is also risk of foreclosure. A bank mortgage has a low interest rate, but it will have higher monthly payments. It can also be difficult to qualify for if you have bad credit or have a poor credit history.
If you need a short-term loan that will help you stretch your mortgage payments, you can look at secured loans. These are short-term loans, often at a very low interest rate, and often extend up to ten years. You can get this kind of loan without being required to put down any cash, and you usually do not pay any money up front.
Before you refinance a mortgage, you should consider your current financial situation. You should set aside enough money to cover your expenses while making your payment. Having a small emergency fund is a great way to avoid getting into serious debt.
Take a close look at your mortgage and determine whether you need a home equity loan or fixed-rate mortgage. No matter which one you go with, be sure you get the best interest rate you can. You can take advantage of many useful financial tools on the Internet.