Timing Your Best Mortgage Refinance Deal
Refinancing your mortgage might need some careful considerations in order to be able to get the best offers and deals
. Other than shopping for the best brokers or mortgage providers, the timing of your refinancing may be equally important and could actually help you obtain the
best mortgage refinance deals and interest rates from different providers. Many experts may generally agree that it may be a good time to refinance when the current interest rate is significantly lower than that of your original loan. Although that is basically the rule of thumb, there are other factors that you may need to consider before refinancing your mortgage because the low interest rate alone might not guarantee you the
best mortgage refinance deals that you may actually benefit from.
Determining the best time for you to refinance may require you to decide on the goals of your refinancing. Some people might do it just to reduce the monthly payments they may have to make while some might have to refinance to consolidate other debts. Based on the reason of your mortgage refinancing, you may determine the best time for you to do so. You may want to bear in mind that refinancing does not immediately pay off the debt but in many cases simply restructures your debt usually at a lower interest rate and different loan term. Therefore you might want to be realistic in setting your refinancing goal.
It may be a good time for you to
refinance mortgage if you have consistently and significantly improved your credit score. Generally lenders and mortgage providers offer the best interest rates and loan terms for applicants with high credit scores. It might be a good idea for you to take a look at your credit score at the time of your first mortgage application and do your best to bring your score up higher than that. If you are able to do that, your lenders might favor your high credit score over other applicants with lower credit scores and offer you low interest rates as you may not be considered as a high risk applicant. So it is advisable that you obtain a copy of your credit report and check through to see if there is any discrepancy that might work against you in your quest to obtain a good mortgage refinance deal.
Many experts may generally agree that if your income has significantly increased you might be able to get better mortgage refinance deals. The effect of your increased income is to lower your debt-to-income ratio. Applicants with high debt-to-income ratio rarely get to enjoy lower interest rate because there may always be a chance for them to miss due payments because they have other debts to pay for as well. It may also be better for you to refinance your
mortgages when your non-mortgage debts have significantly decreased. Non-mortgage debts such as student loans, car loans and credit card balances can be reduced by consistently making due payments without missing any due date.
It may also be a good time for you to apply for a mortgage refinance if the value of your house has increased. When the value of your home increases, you gain greater home equity. This might be the best time for you to refinance to consolidate your other debts or you may even use the money to remodel or make all the necessary improvements on your home to further increase its value. However, if you are refinancing to consolidate your other debts, you may want to be extra careful and make sure that you are able to make all the due payments on time or you might run the risk of losing your home.
Many financial advisors may also advise you to refinance your adjustable rate mortgage (ARM) to a fixed rate mortgage when the interest rate is low. By doing so you may be able to enjoy a fixed low interest rate throughout the life of your loan. You may want to do some calculations before you decide to do this because you might end up paying more in the long run as the term of your loan may be extended as well.
In general, there is no definite or specific time that is best for everybody to refinance. It all depends on your goals and financial capabilities. The rule of thumb is to refinance when the market interest rate is low but other factors as discussed above may need to be considered as well.
by: Ask Bill
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