subject: Sensible Low Mortgage Rate Refinancing [print this page] Have you been thinking about acquiring a low mortgage rate refinance? If so, there are many advantages. A refinance involves getting a second mortgage with a better rate and term in order to pay off the existing mortgage and get a better rate while doing so. Homeowners wishing to refinance do not have to use their current lender to do so. Therefore, refinancing also allows for freedom to shop around.
Refinancing is done for several reasons. One of the most common is to unlock the equity in your home. Doing this frees up cash for major purchases and home renovations. Protection against high interest rates by switching from an adjustable rate to a fixed rate loan is another reason homeowners choose to refinance. An improved credit score can result in a better rate, which many homeowners take advantage of by refinancing.
The best time to refinance is when the market reflects low interest rates. An easy way to ensure that your refinance is feasible is to ensure the current interest rate is at least one percent below the interest rate on your current mortgage. But you should be aware that refinancing will incur some costs; specifically, appraisals, title insurance, legal services, and realty transfer taxes, to name a few. A good rule is to not refinance unless you're sure you can recover the cost of doing so within two years.
Another way to ensure that a refinance is worthwhile is to remain in your home for at least a few years following your refinance. This will allow your finances to re-stabilize, while putting some space between your last mortgage enquiry and your next one. Too many enquiries on your credit report that are too close together can raise a red flag to lenders and result in a higher rate.
Above all, any low mortgage rate refinance should always involve a professional who understands how the market and the banks operate. Having this knowledge on your side can help you avoid many pitfalls and extra costs in the future.
by: Penny Dominus
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