Mortgage refinancing is the process of paying off your current home loan with the proceeds of a new mortgage while using your property as loan collateral. There are a number of advantages to refinancing and when done properly can keep you squarely on the road to financial success. Here are several tips to help you decide if mortgage refinancing is right for you.
Is Mortgage Refinancing Right For You?
In order to decide if refinancing is the right move for your situation it is important to understand how the process works. If you are considering refinancing your mortgage as part of a strategy to get out debt you can easily consolidate higher interest debt and gain a tax deduction when refinancing your home. One of the most important considerations when refinancing your home is to secure the lowest possible mortgage rate. The problem with the rate quotes you find on the Internet and from your local mortgage broke is that the person providing you the quote has marked up the rate for a commission. Unless you can recognize and avoid this markup you’ll never get the lowest possible mortgage rate for your home.
Consolidate High Interest Debt
If you are considering consolidating your high interest debt when refinancing you will be borrowing against the existing equity in your home to pay off credit cards and other installment loans. This means you will be borrowing more than you owe on your existing mortgage which could result in qualifying for a slightly higher mortgage rate. A higher mortgage rate results in a higher monthly payment; however, the tradeoff is that you will be paying less to creditors and gain a tax deduction for all of the interest you pay on the consolidated debt.
Another advantage of refinancing your mortgage could be switching to a fixed or variable mortgage rate. Variable or Adjustable Rate Mortgages (ARM) typically have lower rates than their fixed rate counterparts. If you are in need of a lower payment and are not consolidating debt choosing an Adjustable or Hybrid Rate Mortgage could lower your payment if you are currently paying on a fixed rate mortgage loan. Another common reason for refinancing is to avoid a costly balloon payment if you don’t have the cash on hand to pay it off.
There are a number of options available to you when refinancing your mortgage. Direct lenders are available through banks, credit unions, and other finance companies that fund their own loans. This is not necessarily the best option as any entity that funds its own loans is exempt from the Real Estate Settlement Procedures Act and does not have to disclose their profit margins or markup of your loan. Take out a mortgage from your bank and you’ll never know how much you could have saved refinancing your home.
Mortgage Brokers Access Wholesale Rates
A better option is to refinance with a mortgage broker. These individuals have access to wholesale rates and can offer you a much more competitive deal than your bank. The problem is that many brokers pad their commission by marking up your rate, often without telling you. Once you learn to recognize and avoid this unnecessary markup of your mortgage rate you’ll have access to wholesale rates and can literally save thousands of dollars every year.
You can learn more about your mortgage refinancing options, including strategies for avoiding junk fees and the markup of your mortgage rate with the free videos found on this site; register today using the links found at the top of this page and you’ll be on the path to saving thousands of dollars in unnecessary mortgage interest and fees.