Buying a home can be a stressful event. However, securing the mortgage on this home purchase can be even more overwhelming. In certain situations, you may need to settle for a mortgage that is not the ideal option for you, your family, and your budget. Thankfully, refinancing is an option to consider. Since there are some fees associated with refinancing, such as attorney fees and closing costs, knowing when to refinance is smart. Here are a few signs you should consider refinancing.
Credit Has Improved
Your credit score is one of the most important factors to consider when applying and closing on a home mortgage. If your credit score was not as high as you preferred, your interest rate may have been higher, which caused a higher monthly mortgage payment. Over time, improving your credit is possible. If you have seen an increase in your score after closing on your initial mortgage, it is time to consider refinancing.
Most mortgage companies consider a score of 750 or higher excellent. This higher score will help you secure a mortgage with the best interest rate possible at the time. As stated earlier, the lower your interest rate, the lower your payment will be.
You Can Afford a Shorter Term
Another popular reason to refinance is if you can afford the monthly payment on a mortgage with a shorter term. Most buyers will sign on to a 30-year fixed loan, but a 15-year fixed loan will help you pay off the mortgage faster.
If you are now bringing in more income and have more money to put towards your home, consider refinancing to the shorter term. Of course, other factors should be questioned. National interest rates should be lower and your credit should be in great condition to qualify for this loan.
You Have an ARM Mortgage
Adjustable rate mortgages were popular choices in the past because they allowed buyers to borrow more while paying lower monthly payments initially. Over time, the rates on these mortgages increase, causing the monthly payments to increase, as well.
If you closed on an ARM mortgage years ago and your interest and payments have increased or will be increasing soon, it is time to refinance. Make sure to choose a fixed-rate mortgage during the refinance to avoid financial distress in the future.
Refinancing is a great investment in some situations. If you are dealing with one of the above factors, talk to your mortgage company today to learn if refinancing is the right decision for you. For more information, contact companies like Tennessee Home Mortgage.
After thinking long and hard about what kind of home to buy, I began talking with a real estate agent about getting a deal that I could live with for the rest of my life. I really wanted to find a home and a deal that offered pleasant terms for me and my business, so I began focusing seriously on getting things done. It was amazing to me to see just how different various real estate deals were, and before I knew it, I was making some changes that would work for my lifestyle. Within a few months, things were a lot better. This website is all about understanding and applying real estate deals.