With today’s mortgage rates near record lows, more and more homeowners are refinancing and realizing huge savings as a result. Even a difference of only a fraction of a percentage point can result in huge savings when considered over the decades-long life of a typical mortgage loan, and for most homeowners, refinancing now just makes good fiscal sense. But while it’s true the potential for significant savings is a great motivator for most homeowners to refinance, individuals considering refinancing their mortgages still need to take their time when considering lenders and determining which loan is best for their own individual needs. The following guidelines are a good start for most homeowners considering jumping on the refinancing trend before rates begin to creep upward once again. â€Consider your needs. Is your budget tight? Do you need a little more cash at the end of each month? Or are you interested in using some of the equity you’ve built up in your home to pay for a major expenditure? Then looking for a loan with a low interest rate makes sense for you. If, on the other hand, you’re one of the lucky individuals who finds they have a little extra money to spend at the end of each month †maybe as the result of a raise or promotion at work, or a new, higher-paying job †you might be better off considering looking for an affordable loan with a shorter duration. Typically rates for shorter term loans are slightly higher than those for 30- and 40-year mortgages, but they have the benefit of allowing you to pay off your loan more quickly, ridding yourself of the burden of a mortgage in less time than a longer mortgage. â€Do you need money to finance a major life expenditure? While some homeowners will refinance the existing mortgage balance, most homeowners use the refinancing process as an opportunity to withdraw some of the equity in their homes, in order to pay for a child’s college education or dream wedding, a vacation home, or a once-in-a-lifetime trip. Refinancing is also a popular way to obtain large amounts of cash to upgrade and renovate the home, resulting in an additional increase in equity and making the home more marketable when it comes time to sell. Before refinancing your own home, be sure you fully explore your financial and personal needs for the next several years and take advantage of low-interest money now to pay for eventual needs and costs. â€Shop around for the best deal. Just as you did when you obtained your initial mortgage, it’s essential to look around for the best deal when you refinance. Most lenders today have websites, making loan quotes and information on terms easily accessible. In addition to individual lender websites, many sites exist that offer the option of comparing multiple lenders in one view, so that you can see actual side-by-side comparisons of interest rates, loan duration, and other terms that can have an impact on the overall viability of your loan. By offering results in a tabular format, these sites allow you to compare apples to apples, to ensure you make fair and accurate comparisons between lenders. Most of these sites also have information regarding any special deals with specific lenders, including signing bonuses and fee waivers. In addition to websites, consider the financial and real estate sections of your local metropolitan newspaper, and ask for the advice and recommendations of friends, family and coworkers. Often, these individuals have direct experience with the customer service aspect of specific lenders; considering you’ll likely be dealing with the lender for many, many years, prompt, courteous customer service is an important consideration. â€Understand the loan’s terms thoroughly. Most homeowners believe the lowest interest rate implies the best deal. But there are many, many more factors that go into the complete loan package. When you believe you’ve narrowed your search to a few lenders, be sure to ask about specific fees associated with the loan, including penalties and late fees, as well as closing costs, which can add thousands of dollars to the cost of your loan. In many cases, the lowest interest rate may not reflect the best overall loan package, so be sure to shop carefully. â€Read the contract †then read it again. A mortgage document is a binding and legal contract, meaning you †and the lender †are legally bound to follow the terms set forth in the mortgage document. Just like any legal document, it’s imperative that you read the loan documents thoroughly before signing, taking note of any questions you have as you read. Be sure to have all of your questions answered to your satisfaction before signing. For many homeowners, refinancing to take advantage of today’s low mortgage rates is a wise financial decision. Just be sure you take the time to completely understand the loan process before you sign, in order to ensure you get all the benefits refinancing has to offer.
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