Mortgage Refinancing Tips
Saving money on mortgage payments is the prime objective of every homeowner. By refinancing your mortgage, you may have an opportunity to save a significant amount as long as you go about it the right way. Besides, you may be able to pay off your mortgage faster if you can avail of better lending terms.
To begin with, it would be prudent to apply to different lenders for pre-approval. This will help you make a note of those with the lowest rates. However, don’t ask for a pre-approval from lenders who are likely to ask for your credit history. The reason behind this is that each time your credit history has been looked at by lenders, your credit score drops a little. Too many inquiries may affect your ability to demand the lowest possible interest rate. Some lenders do not pull up your credit history when you ask for a pre-approval. However, do check their website for the terms and conditions before making your application. Many of them ask you to describe your credit worthiness as part for the pre-approval process. As long as lenders do not have your social security number, they will not be entitled to pulling up your credit history.
It is important to note the interest rates that different lenders offer you in the pre-approval stage. In addition, make sure you are aware of the closing costs. If either of these is high then you may not be able to benefit from refinancing with that particular lender.
If your original mortgage attracts an penalty for pre-payment then you may have to pay out a lot more than you expected. Therefore, make sure you understand the terms and conditions of your first mortgage before you apply for refinancing. Pre-payment usually attracts a total of 6 months of mortgage loan interest; however, the terms differ amongst lenders.
When you decide to work with a lender, it is advisable to get all the terms and conditions including the interest rate and closing costs in writing. This will help you budget your repayment accordingly. Once again, determine if there is any pre-payment penalty. It is always important to read the fine print so that you don’t end up paying much more than your bargained for.
If you have a bad credit history, look for a lender that is willing to work with you. There will definitely be a few that will offer you reasonable terms. In the meanwhile, you can work at building up your credit score. There are plenty of tools to help you grab a good deal. Make use of mortgage refinance calculators. This will give you an accurate picture of how much you can afford if you decide to take out a second mortgage on your home. These calculators are available online. All you need to do is fill in a few details and you will receive figures that will help you make an informed decision. It will also indicate the costs you have to bear with each lender.