Refinance your mortgage

Refinancing a mortgage means altering or adjusting the terms or tenure of a mortgage.

It is done by taking a new loan; this new loan pays off the old one on a better rate. Adjusting the mortgage to pay more can decrease the years you are in debt or increase the number of installments or payment plan.

It is important to know what will determine the rate you get:

  • The size of the loan
  • Your credit history or score
  • The ratio of debt and income
  • When will the loan end
  • The rate of locking or floating: All the rates have a risk of increasing or decreasing due to market fluctuations. The borrower gets the benefit of locking the rate because of the market rate fluctuations. The price might increase over a period of time and will keep increasing. So mostly borrowers lock the rate as they get to it. But if the borrower lets it float, this will benefit the lender who will get a higher rate due to the increase.
  • Points you have paid.
  • Presented rates are unreliable: You need to know that when the refinancing companies giving loans display their rates, it’s just to attract the people so that they fall prey.
  • Refinancing costs: Beware of the refinancing costs. There is no point of refinancing, if the total fees and rate is higher than that of the amount you have after refinancing. You need to calculate the upfront fees, the loan origination costs, appraisal fees, application fees, the points (one point is 1% of the total loan), the attorney fees, insurance fee, inspection fee and survey fee.
  • Need to know if your lender will charge you something for your current loan: Some lenders do charge an amount which is to be paid once. This is because when you plan to pay the loan all at once and early then they will lose on the profit, they make on the monthly installments.
  • Increase in the time of the repayment plan: Your loan repayment time will be lengthened and you will pay less monthly but for more years.
  • Pay more to reduce the interest: To reduce the interest every month and say for a time of 15 years, if you increase the amount of the monthly payment, you will pay less interest which otherwise will be paid every month for 15 years. Basically you will save the interest amount.
  • Increasing and decreasing the amount of loan repayment: If you are going to increase the term or lengthening it to pay $ 150 less each month then you will be paying more interest in the long run. On the contrary, if you decrease the term or shorten it to give more and at some point of time are unable to pay the increased monthly amount, you will be in debt.

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