What Is Mortgage Refinancing?
A Mortgage Loan Can Save You Huge Amounts of Cash on Interest Payments Every Month!
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Mortgage Rates are at all-time lows, so it’s no surprise that refinancing applications have exploded lately. It may be a good time to refinance your mortgage if your lender has a new rate that is much lower than what you’re paying now and you expect to remain in your house for many more years. Your home is a valuable asset and the banks will allow you to borrow against the principal equity you own in your home. This can be released to you in favourable loan terms.
Mortgage Refinancing can also benefit you when you switch providers as most loan providers will calculate the best deal for you, saving you more money in the long term. The current provider you are with may want to make money from you by keeping you locked into a higher rate. Shopping around for better rates is always a good idea.
Furthermore, taking a loan out backed by your home is a much cheaper option than for instance using a credit card or personal loan when you need extra cash.
Mortgage Loans are also an excellent idea if you are planning on renovating your home. The loan will take into consideration the extra value you add to your home through carrying out renovations. This means you will be shoring up your principal whilst being able to borrow at cheaper interest rates. Americans that renovated their homes in a significant way, for example by building an extension and installing solar panels, were able to see an average of a 15% increase in value. Keep on reading to find more great info on Mortgage Loans.
Refinancing Your Mortgage Will Reduce Your Monthly Payments Significantly and Free Up Extra Cash.
Determine the proportion of your current mortgage payment that is made up of principle and interest (P+I). If your most recent mortgage statement does not include this amount, deduct your monthly escrow payment from your total mortgage payment. Then, if you refinance, figure out how much your new mortgage payment will be.
This step is almost certainly taken care of for you if you obtain a refinancing quotation from a lender. You can also use a mortgage calculator to figure out your monthly payment. Subtract your prospective new payment from your existing P+I mortgage payment to calculate your monthly savings.
Refinancing Can be an Excellent Way to Lower Your Monthly Mortgage payments!
When you refinance your mortgage, you will most likely be given a new 30-year loan. Meanwhile, the new mortgage will have a different payback schedule.
Assume you’re five years into a $300,000 mortgage with a four percent interest rate. Your monthly P+I payment is $1,433, and you are still liable for approximately $271,000 of the initial total.
Assume you choose to refinance the balance with a new 30-year mortgage at 3.25 percent interest and $3,000 in closing costs. You’ll have a new monthly P+I payment of $1,180, resulting in a $253 reduction in your monthly mortgage payments.
Make Significant Savings Over the Life Span of Your Mortgage, Extending Can Save You Money.
If you keep the original mortgage, you’ll pay $1,433 per month for the next 25 years, for a total of $429,900. When you refinance, your monthly payments will be reduced to $1,180 per month for 30 years. You’ll pay $427,800 in total, including the $3,000 refinancing fee.
So, refinancing will save you $2,100 in the long run. It is still the less expensive option, and it may be able to help you save money on a monthly basis. When it comes to the total payment over the life of the mortgage, the difference in monthly payments does not indicate a significant amount of savings.
Your Current Mortgage Might Not Be offering You The Top Market Rates Available Today, Best to Shop Around!
The vast majority of home buyers apply for a mortgage with only one lender. It could be a bank with which they already have a relationship, or it could be an internet mortgage lender with a reputation for low rates. But which of them offers the best loan terms? Unfortunately, none of these approaches are always the best choice. That is why it is essential to shop around for the best deals.
Mortgage rates are not standardised, which means that, while they fluctuate in response to market conditions, each lender sets its own rates and employs its own methods to evaluate borrowers. To cut a long story short, it is entirely possible for two lenders to offer a consumer vastly different mortgage APRs.
As a result, applying for a mortgage refinance with a few different lenders is a good idea. I usually recommend submitting an application to five different lenders, including a large national bank, a local financial institution, a credit union, and an online-only lender. Sure, it will take a few extra hours, but the extra time could save you a lot of money.
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