3 Questions To Ask Yourself Before Refinancing A Mortgage

Refinancing a mortgage lets you pay your debt fast, obtain a lower interest rate, tap into home equity, and turn an adjustable-rate mortgage (ARM) into a fixed-rate mortgage. While this is generally a wise financial decision as it allows you to reduce your interest rate by at least two percent, timing plays a major role in whether it can save or cost you money.

Many people begin to consider refinancing as soon as the VA refinance rates start to drop. Before rushing into a decision, though, you should weigh the current markets and your own finances. Here are some questions you should be asking yourself before making a verdict:

Things You Need To Know About Refinancing

1. What Has Changed Since I Secured My Last Loan? It is probably time to secure a fresh loan if your credit score and payment history has dramatically improved since you last secured your loan. You’re more likely to qualify for better loan terms and a better interest rate. On the other hand, it might be better to wait if you’ve been struggling with your finances in the previous years since you purchased your home. It may not seem like a big deal since you have navigated your finances in the dark now that it has passed, but it can often leave a mark on your credit history. Applying for a refinance will only help you save money if you can access a good rate. Otherwise, you might want to wait, especially if you have a recently damaged credit score and if your current credit score is lower than the score you originally secured your mortgage with.
2. What Should I Do to Improve My Credit Score? Prior to any kind of refinancing, consider repairing a low credit score. Be diligent with your score as you start making your determinations as doing so will secure you the best rate. Make sure to pay on or ahead of the due date and never carry a balance to reap the best rewards once you determine that it’s the perfect time to refinance.
3. Do I Need to Change the Type of Loan I Currently Have? Low-interest rates are ideal, but it might be time to upgrade to a fixed-rate loan if you initially could only secure a non-fixed rate loan. You might also consider lowering your interest rate and paying less for a house that you don’t plan to live in for too long if you plan on moving anytime soon. You can also consider extending the period of your loan if you were able to secure a short-term loan that makes your monthly payments more expensive than you’d like.

Apply For a Mortgage Refinance With America’s Mortgage Solutions

Rates are usually the deciding factor for most people getting ready to refinance, but keep in mind that it is not always the best option. Remember that there are pros and cons to every decision that you do, so reasonably calculate your risks and rewards and keep in mind the questions you have to ask yourself before refinancing a mortgage. 

If you do decide to refinance or you need to secure a housing loan, reach out to us. We are licensed mortgage originators based in Palm Beach, Florida. Please call us at (561) 316-6800 to schedule your consultation.