If you opt for mortgage refinance, it is undoubtedly a good way of keeping foreclosure at bay but you need to strike the right kind of deal for the same. There are many mortgage lenders in the mortgage industry and not all are dependable. One of the main factors that will decide the success of your mortgage refinance is the lender you choose. Following Obama’s Mortgage Bailout Plan, many lenders have become flexible and can work out ways to help you in saving your dream home.
There are many factors that should be taken into account if you are planning a mortgage refinance in addition to choosing the right lender. Given below are few aspects that need to be considered prior to taking the plunge –
Identify the purpose of refinancing
There are many reasons why homeowners opt for mortgage refinance. Some of the common reasons are as follows –
* Better rate of interest
When you opt for mortgage refinance, it is usually done so that you enjoy better mortgage rates that make your mortgage payments affordable and allow you to stay regular with your payments throughout the term of the loan.
* Switching from ARM to FRM
ARM or adjustable-rate mortgages are good as long as the rates are low. However, if the mortgage rates increase, you will have to pay higher each month. So, to do away with uncertainties in your monthly mortgage payments, many homeowners switch over from ARM to FRM so that the payments are predictable and fixed. This is usually done through mortgage refinancing.
* Shorten the term of the loan
If the original loan term was 20 years and you want to wrap up your mortgage payments earlier, you can refinance to shorten the length of the loan. In this way you will also be building equity in your property.
* You need extra cash to fulfill your financial obligations
Many homeowners opt for mortgage refinance so that they can get access to some extra cash that will enable them to meet their other financial obligations. This may include making payments for your credit card bills etc. This is possible if you have enough equity in your home. This is referred to as Cash-out refinancing.
So, it is important to identify why you need to refinance your mortgage. Next is to shop around for a good lender. This is equally important. These days you may come across lenders that waive off closing costs and points etc. However, if the lender waives off these expenses, make sure they don’t compensate in form of higher mortgage rates. So, you will have to be very careful before you finally settle for a mortgage refinance deal. Unless your objective of availing mortgage refinancing is clear you will not be able to convey the same to your lender.
You can shop around for the right mortgage lender online. This becomes easier as you will be in a position to shop around for better rates as you will get the opportunity to compare rates offered by different lenders.