Is it Time to Refinance?
Lowering your interest rate
The interest rate on your mortgage is directly tied to how much you pay on your mortgage each month–lower rates usually mean lower payments. You may be able to get a lower rate because your credit score has improved or because of changes in the market conditions. A lower interest rate can make it possible for you to build equity in your home more quickly.
Adjusting the length of your mortgage
You may want a mortgage with a longer term to reduce the amount you pay each month, or you may want to switch to a shorter-term mortgage with a lower interest rate.
Changing from an adjustable-rate mortgage to a fixed-rate mortgage
If you have an adjustable-rate mortgage, you may find yourself uncomfortable with the prospect of your payments increasing. You may want to consider switching to a fixed-rate mortgage to give yourself the peace of mind of having a steady interest rate and monthly payment.
Are you Eligible to Refinance?
Determining your eligibility for refinancing is very similar to the approval process you went through with your first mortgage. Your lender will consider your income, assets, credit score, other debts, the current value of the property, and the amount you’d like to borrow. If your credit score has improved, you should be able to get a loan at a lower rate.
What will Refinancing Cost?
It is not unusual to pay 3 to 6 percent of youroutstanding principal in refinancing fees. These expenses are in addition to any prepayment penalties or other costs for paying off any mortgages you might have.
Reasons not to Refinance
- You’ve had your mortgage for a long time.
- Your mortgage has a prepayment penalty.
- You plan to move from your home in the next few years.