When you secure a mortgage for a new home or for one that you already own in order to make improvements or to cover an emergency, you might think that you can afford the rate that is offered. After a few years of paying the same rate, it could be evident that it's eating away at your bank account. Before getting in too deep with the mortgage payment and going bankrupt, consider home refinance to get a lower rate that you can afford.
Before you start any paperwork for refinancing the home, use a few of the online calculators to determine what you can afford. You can see everything from the fees that you'll pay along with the interest rate for the new amount. Plug in a few numbers with the interest rate depending on your credit score and the company that you might work with to see how it will affect your payment.
What Is Your Goal?
You need to have a goal in mind of why you want to refinance the home and a goal of how much you want to pay each month. Most people want to shorten the length of the mortgage, so this should be something to keep in mind when looking at rates as you'll want to find the lowest interest rate possible. Consider making a list of the pros and cons of the goals that you have in mind before talking with the finance specialist about the new rates as this will give an idea as to whether you should even consider refinancing.
One of the things that you want to look at before refinancing is your credit score. If it's improved then you can probably get a lower interest rate and monthly payments. Work on improving the credit score in any way possible over a few months before refinancing.
Calculate a few figures to see how long it will take before breaking even after paying the fees and other expenses that are associated with refinancing. If it's going to take longer to get the money back, then you might want to pay down the mortgage a bit more before refinancing.
A new home mortgage might seem like a good idea, but you need to make sure that you're actually getting a lower rate. Talk to mortgage professionals who can give an idea about the interest rates and any programs available to help with refinancing. Spend money saved wisely to get the mortgage paid off quickly as to improve your credit and own your home.
Hannah Whittenly is a freelance writer and mother of two from Sacramento, CA. She enjoys kayaking and reading books by the lake.