Golden Tips for Refinancing your Mortgage

Interest Rates (Photo credit: 401(K) 2013)

Mortgage rates are going through a good phase now. The interest rates for thirty ear mortgages are at a low end. This means that it is good news for all those who are looking to refinance their mortgages in the hopes of getting a better rate of interest. Many financial experts have opined that if you are looking for a good time to refinance your mortgage then that time is now. Low interest rates mean that you will be able to save more money. So if you have around 20 per cent equity on your house and a credit score of at least 740, then a creditor could give you a good refinancing package. 

If you are a homeowner looking for a refinance then here are some things that you should do and consider before taking the plunge. These are some of the things that experts recommend home owners should do.

Look around

The funny thing about mortgage interest rates is that they can shift really drastically from place to place. So don’t despair and lose hope if you a creditor is offering you a high rate of interest. Do a lot of research into different places before you make a choice. There are quite a few financial websites where you will find reviews of lenders. Also remember not to blindly go in for the interest rates alone. Look at things like customer support, fees, etc. Experts say that interest rates can differ by 1 percent or even more from lender to lender. That can translate into a huge difference in your monthly payments.

Don’t jump for a low rate

It is vital to remember that when you are refinancing a mortgage, there are many costs like closing costs which you will have to pay. These can be quite high. So if you already have a mortgage with a low rate of interest like 5 percent and the rates have dropped to 4 percent, it might not be an excellent idea to refinance. Think of how many months you will take to cover the closing costs and so on. Don’t go in for a refinance if you are not able to cut the rate of your mortgage by at least 0.5 percent or more.

There’s always a closing cost

Many refinancing offers will come with the tempting “no closing costs” line. Don’t fall for it. There will always be some costs for the loan. Even if it isn’t called “closing cost”, companies will charge you something or the other in some form. If they don’t call it closing costs, they could call it “up front charges” where you will be asked to pay an amount to cover certain expenses. It could be added to your new loan principal, instead of being charged separately as closing costs. In case you do happen to find a no or low cost refinancing, you will notice that the rate of interest is slightly higher than the others. They will find some way or the other to recover the money from you.

The best thing to do is to as your creditor to show you all the options available. Ask for a clear breakdown of all the costs you will incur if you do go in for a refinancing. Then, you can choose the one best for you. The main thing to take away from all this is that there will always be costs involved in a refinancing, and if you are aware and are able to handle it, then you can go ahead.

About the author

Jon has been working as a senior loan officer for a bank since the last eight years at RateZip. He advises homeowners on the kinds of mortgage options available to them. In his free time, Jon loves to read graphic novels.

6 Tips to Help You Get a Home Loan

If you are planning to get a home loan, then you must be losing your sleep thinking about whether or not you are going to get an approval. It is difficult to get a home loan from a good lending institution or bank. But, if you go about the process carefully and plan ahead of time, you can manage to get a home loan. Given below are six tips that can help you get a home loan without much hassle  

1. State The Purpose Of The Loan - When you apply for a loan, the lenders need enough documents and proofs to be sure of your purpose. You may have to furnish the building plan and other relevant documents that show the lenders that the value of the property that you have quoted is correct. There are some lending institutions that might even send officers to inspect the property. 

2. Determine Your Income And Expenses - There is a limit to how much you can get as loan amount. This can easily be calculated depending on your gross income and expenditure per month. Prepare the credit report. Try to pay off most of your debts before you apply for the loan. If you have a lot of debt, the lenders would not be keen on lending you money for fear of default. 

3. Check The Eligibility Criteria - All lending institutions have different eligibility criteria. The criteria for the hdfc home loans are different from those of the state banks. Check the eligibility criteria of the institution you want to borrow from and try to fulfil those. Most expect you have a job with a minimum income, are in good health, and have a good credit record. 

4. Furnish All Relevant Documents - When you apply for a home loan, most lenders want ID and address proof. You also have to provide your bank account statement and a statement for all your assets and liabilities. You also have to furnish a salary statement from your employer as a proof that you are in a position to repay the loan amount. These papers should be in proper order and you should furnish them without any delay. 

5. Have A Reliable Guarantor - Some lenders want an additional guarantee in the form of a strong guarantor. In the case of the loan defaulting, the guarantor will step in and ensure that the loan is paid fully. Therefore, if you have a guarantor who is economically strong, the lender is going to warm up to you and this ensures an approval. 

6. Check Online For The Best Loan Option - It is impractical to apply for a loan amount that you are not going to get approval for. Thus, you can always go to different sites online where you can plug in your income, expenditure and other criteria to calculate the loan amount you are eligible for. 

These six tips can help you get an easy approval. Make sure to be clear in all your financial details and have all your papers in order.