If you are self-employed, either as a freelancer or as the owner of your own business, your income can fluctuate greatly from year to year. That can make it difficult to get approved for a mortgage, although there are some things you can do to improve your chances. Here are three tips for securing a mortgage if you are self-employed.
Make Sure Your Credit Score Is In Good Shape
While your ability to pay back a mortgage is the most important factor in approval, your credit score is a close second, and that goes for every borrower, not just those who are self-employed. If you have a credit score in the high range -- something above 750 or 760 -- it will help you get approved for a mortgage. To boost your score, make sure you pay all bills on time, pay down your debt levels and don't make any new big purchases or apply for new credit soon before you apply for a mortgage.
Have a Large Down Payment
The more money a bank lends you to buy a house, the more risk it is taking in that the money won't be paid back. If you are self-employed and considered a higher risk to begin with, one way you can alleviate some of that risk is to be able to put down a large amount of money. Putting down 20 percent is standard for a conventional loan, and you should be willing to contribute at least that much. Putting down at least 20 percent also will save you money in the long run, because you won't have to pay for mortgage insurance and you will pay less in finance charges over the life of the loan.
Have Significant Assets
One way to put a lender at ease about your ability to pay for a mortgage is to have significant reserves in the form of assets. If you have large amounts of money in regular savings, brokerage and retirement accounts, it offers a reserve for you to tap should your income take a dive. Other forms of property, such as personal and business property that's paid off and has value, also help.
There are a lot of people who are spending more time at home these days. As the temperature starts to warm up once again, there are some homeowners who are looking for ways to upgrade the outside of their home. Even though there are some people who are looking at installing a brand new patio or deck, this can be extremely expensive. Fortunately, there are ways that homeowners can completely transform the exterior of their home without breaking the bank. Take a look at a few of the top ideas below.
Consider Adding An Outdoor Rug
First, homeowners should consider adding an outdoor runner or rug to the exterior of their home. Because this run is going to be outside, try to go with bright colors. Furthermore, there are also specific runners and rugs that have been designed specifically to stand up to the wear and tear of the outdoors. Consider adding a rug that leads from the patio door to the deck. Or, think about placing an area rug underneath the table outside. This can completely change the look of the patio.
Think About Installing A Swinging Chair
For those who are looking for a way to relax outside, consider installing a few swinging chairs. In some situations, homeowners might be able to attach a swinging chair directly to the awning outside. In other situations, it might be a smart idea to install a swinging chair that hangs from a tree in the yard. It is important to make sure the awning or the tree is able to support the chair before it is installed. Then, add a bright cushion to the chair and relax outside with a great book!
Use Citronella Candles
Anyone who likes to spend evenings outside under the stars should consider using candles. Specifically, think not using citronella candles. Citronella candles will help keep the mosquitoes away in addition to adding a majestic fuel to the outdoors. Think about using them on top of poles that line the walkway. This is a great way to add a little bit of ambiance to an evening party.
Consider a few of these ideas to completely change the exterior of the home in a budget-friendly way.
Last week’s economic reports included readings from S&P Case-Shiller Home Price Indices, readings on new and pending home sales, and the University of Michigan’s Consumer Sentiment Index. Weekly reports on mortgage rates and jobless claims were also published.
S&P Case-Shiller Home Price Indices: Home Prices Rose Faster in November
The Case-Shiller National Home Price Index showed that November home prices grew by 9.50 percent on a seasonally-adjusted annual basis. October’s reading showed 8.40 percent home price growth; analysts expected a year-over-year pace of 8.80 percent for national home price growth.
Severe shortages of available homes coupled with high demand for homes continued to fuel rising home prices as builders faced rising materials costs. The covid pandemic added to home price growth, which is expected to slow as businesses and employers reopen and flight from congested urban areas slows.
The 20-City Home Price Index reported home price growth in 19 of 20 cities; Detroit, Michigan has not reported its data in recent months. Phoenix, Arizona, Seattle, Washington, and San Diego, California again held the top three places in the 20-City Index.
New Home Sales Rise in December
New homes sold at a seasonally-adjusted annual pace of 842,000 sales as compared to a sales pace of 829,000 homes sold in November. Pending home sales were lower in December with a -0.30 percent decline. Analysts forecasted a reading of -0.20 percent in pending sales based on November’s reading of -2.60 percent fewer pending home sales. Seasonal influences including winter weather and the holiday season typically cause home sales to fall during the winter months.
Mortgage Rates, Jobless Claims Lower
Freddie Mac reported lower fixed mortgage rates last week; the average rate for 30-year fixed-rate mortgages fell by four basis points to 2.73 percent. The average rate for 15-year fixed-rate mortgages fell one basis point to 2.20 percent. The average rate for 5/1 adjustable rate mortgages was unchanged at 2.80 percent. Discount points averaged 0.70 percent, 0.60 percent, and 0.30 percent respectively.
First-time jobless claims fell to 847,000 claims filed as compared to the prior week’s reading of 914,000 initial claims filed. Continuing jobless claims were also lower with 4.77 million claims filed. as compared to the previous week’s reading of 4.97 million claims filed.
The University of Michigan reported an index reading of 79.0 in January for its Consumer Sentiment Index. Analysts expected no change to December’s reading of 79.2. The continued spread of covid-19 and related economic concerns contributed to lower consumer sentiment.
What’s Ahead
This week’s scheduled economic readings include labor-sector reports on public and private obs growth and the national unemployment rate. Weekly reports on mortgage rates and jobless claims will also be released.
Case-Shiller Home Price Indices reported a year-over-year national home price gain of 9.50 percent for November 2020. Home prices continued to grow in response to high demand for homes and homeowner relocations in response to the covid-19 pandemic. Inventories of pre-owned homes remained low. Home prices rose at a slower pace in November but remained strong in most areas.
20-City Home Price Index Reports Home Price Gains in 19 of 20 Cities
November’s edition of the 20-City Home Price Index reported the highest year-over-year home price gain of 13.80 percent in Phoenix, Arizona, which held first place for the 18th consecutive month. Seattle, Washington reported year-over-year home price growth of 12.70 percent, and San Diego, California held third place with year-over-year home price growth of 12.30 percent. Home prices rose 1.50 percent from October to November.
Lower numbers of mortgage applications indicated that demand for homes may be slowing, but analysts expected demand for homes to continue driving home prices up. Factors contributing to slowing home sales include affordability and less inclination to relocate as businesses and employers reopen. Low inventories of available pre-owned homes limited prospective buyers’ choice of homes; home builders faced rising materials and labor costs that impact their ability to produce affordable homes.
FHFA Reports Home Price Growth Exceed Post-Recession Pace
The Federal Housing Finance Agency reported that prices of single-family homes owned or financed by Fannie Mae and Freddie Mac grew by one percent between October and November; home prices were up by 11 percent year-over-year. November was the sixth consecutive month for home price growth reported by FHFA. Data supplied by FHFA is based on house purchases and does not include refinancing transactions.
Dr. Lynn Fisher, Deputy Director of FHFA’s Division of Research and Statistics, said “House prices have risen by at least one percent for six consecutive months. The acceleration has been slowing, but annual gains now outpace the prior housing boom. Current conditions can be explained by fundamentals including low rates and tight housing supply, which have been intensified by the pandemic.”
Year-over-year home price growth within the nine federal census divisions ranged from 0.30 percent in the West South Central Division to 14.00 percent growth in the Mountain Division. Home price growth in the mountain west continued to grow as homeowners in costly and congested coastal areas moved to more affordable neighborhoods in cities including Phoenix, Arizona, and Boise, Idaho.
Finding the perfect property is an exciting feeling, but its relative location can leave a lot of room for worry. Buying a home in the city is a venture that comes with an entire assortment of advantages and disadvantages. While the location might be close in proximity to businesses, services, and other people, it's easy to worry about the other aspects of city living. What are the great and not-so-great facets of living on a busy street?
Pro: Access to Businesses and Schools
The chances are high that anyone living in a busy area is within walking distance of any store, shop, or service. Likewise, children have a range of options for education in busier areas; there are often multiple schools to choose from in any given busy area.
Pro: Access to Many Internet/TV Providers
In highly populated areas, a large number of internet and TV providers can co-exist. This means residents have a number of options when the time comes to choose providers. Luckily, it's often difficult for providers monopolize densely populated areas.
Pro: Sense of Community
Many people that live in busy areas will be quick to share that they adore the sense of community. In fact, a large population is often one of the biggest reasons that people choose to move to bigger areas.
Con: Noise Level
As a street sees more activity, there's no doubt that the noise level will also be a bit higher than usual. Residents that own homes on busy streets not only hear lots of noise from outside traffic, but they also often hear police sirens, animals, conversation, and more.
Con: Higher Price
It's no secret that busy areas are a bit more expensive to live in. As anyone would expect, the convenience of city living comes with a higher price. Expect to hand over quite a bit more for a property in a highly populated area.
Con: Parking
Depending on the location of the neighborhood, parking can also be a problem. If street parking isn't allowed, a resident in a big city might have to sacrifice their vehicle or park it a long distance from the property. This can be off-putting for many buyers.
If you're on the fence about purchasing a property on a busy street, get more information from your trusted real estate agent before making a decision. A professional agent can provide valuable information about the property, neighborhood, chances for resale in the future, and much more. Don't proceed any further without an agent's advice!
There are lots of homeowners who are looking for a way to improve the quality of their home while also increasing the value of their property. Unfortunately, a lot of home improvement ideas can be prohibitively expensive. It is not unusual for homeowners to spend six figures on a renovation project. On the other hand, there are also home improvement ideas that will not break the bank.
What are a few of the top ideas that homeowners should consider?
Start With A Few Quality Ceiling Fans
First, homeowners should consider starting with a few quality ceiling fans. Because a lot of homeowners do not look up at the ceiling on a regular basis, they may not realize just how old their ceiling fans are. Therefore, homeowners should consider updating their ceiling fans. Ceiling fans should be hung between 7 and 8 feet above the floor. Now, there are advanced Energy Star ceiling fans that will help homeowners lower their utility bills while also increasing the value of their property. Finally, even advanced ceiling fans are not that expensive.
Consider Planting Some Trees In The Yard
Another idea that homeowners need to consider involves planting trees. Planting trees will not only prevent erosion from the property but can also lower energy costs. Trees can protect the property from rain, wind, and the sun. Furthermore, as trees grow over time, they also increase the curb appeal of a property, driving up the value of the home. Even though a lot of people say that money does not grow on trees, planting a few trees in the yard can help homeowners save a lot of money while also boosting their home’s value. Fortunately, planting trees are also not that expensive.
Increase The Quality Of The Insulation In The Home
Finally, a lot of homeowners neglect the quality of the insulation in the home. Even though this might not be as attractive as a complete kitchen or bathroom remodel, upgrading the insulation of the home reduce its utility bills. Furthermore, upgrading the installation is not that expensive. Homeowners should consider taking a closer look at the insulation of their homes every few years. There may be ways to save a significant amount of money.
As we move into 2021, there are a lot of people who are thinking about getting a mortgage. Even though it is a great time to look for a home loan right now, it is also important for everyone to make sure they place themselves in the best position possible to be successful. It is important to take the following steps for those who are interested in applying for a new home loan this year.
Calculate Your Budget Carefully
First, it is important to take a look at the budget carefully and find a mortgage that is affordable. Remember that the mortgage payment isn’t the only expense that comes with owning a home. It is also critical to think about real estate taxes and homeowners’ insurance, which is often included in the monthly payment that goes back to the lender. Then, do not overlook the importance of utilities. Some of the most common utilities include electricity, water, gas, cable, and internet. Before looking for a home loan, make sure to calculate the budget carefully.
See If Extra Payments Are Possible
When people first take out a home loan, the majority of the monthly payment is going to go towards interest. Then, at the end of the loan, the majority of the payment is going to go towards the principal. Those who are able to afford to make extra monthly payments will be able to attack the principal directly. The faster homeowners are able to pay off their home loans, the less they are going to pay in interest over the life of the loan. Any homeowner that is able to make extra payments should consider doing so.
Don’t Forget To Deduct Mortgage Interest From Taxes
Anyone who is looking for a way to reduce their tax liability should consider taking out a home loan. There are lots of tax breaks that are available to people who own a home; however, for many homeowners, the biggest deduction is going to come in the form of mortgage interest. This can significantly reduce the amount of money that homeowners have to pay in taxes. Be sure to speak with the lender to learn more about the relationship between mortgage interest and tax deductions.
Last week’s economic reporting included readings from the National Association of Home Builders Housing Market Index, along with Commerce Department readings on housing starts and building permits issued. The National Association of Realtors® reported on sales of previously-owned homes; weekly readings on mortgage rates and jobless claims were also released.
NAHB: Home Builders’ Housing Market Index Falls in January
Homebuilder confidence in housing market conditions fell three points to an index reading of 83 in January. The National Association of Home Builders Housing Market Index expected a reading of 85 for January as compared to December’s index reading of 86. Increasing covid-19 cases and rising materials costs caused builder confidence to fall as builder concerns rose.
The NAHB Housing Market Index remained strong as any reading over 50 indicates positive builder sentiment toward housing markets. Component readings for January’s Housing Market Index also fell; builder confidence in current market conditions fell two points to an index reading of 90. Homebuilder confidence in market conditions for the next six months also fell two points to 83. Builder confidence in buyer traffic in new housing developments dropped five points to an index reading of 68. Readings of more than 50 for buyer traffic were rare until the covid-19 pandemic started.
Conflicting factors impacted home builder confidence readings. Home sales rose as urban homeowners sought new and larger homes in the suburbs and rural areas, labor shortages, and rising materials expenses worried home builders.
Housing Starts and Building Permits Rose in December
The Commerce Department reported a seasonally-adjusted annual pace of 1.67 million housing starts as compared to November’s reading of 1.547 million starts. Building permits issued rose in December with 1.709 million permits issued annually as compared to November’s reading of 1.635 million housing starts.
The National Association of Realtors® reported 6.76 million sales of previously-owned homes sold as of December on a seasonally-adjusted annual basis. Home sales are increasing although demand exceeds available inventory and home prices continue to rise.
Mortgage Rates, Jobless Claims Lower
Mortgage rates fell last week with the average rate for 30-year fixed-rate mortgages two basis points lower on average at 2.77 percent. Rates for 15-year fixed-rate mortgages averaged 2.21 percent and were two basis points lower. Rates for 5/1 adjustable rate mortgages averaged 2.80 percent and 32 basis points lower.
First-time jobless claims fell to 900,000 claims filed as compared to the prior week’s reading of 926,000 new claims filed. Ongoing jobless claims were also lower last week with 5.05 million continued claims filed as compared to 5.18 million claims filed the previous week.
What’s Ahead
This week’s scheduled economic reporting includes readings from Case-Shiller Home Price Indices, the FHFA House Price Index, and the Federal Reserve’s Statement from its Federal Open Market Committee. Monthly readings on new home sales and consumer sentiment will also be published. Weekly readings on mortgage rates and jobless claims will also be released.
Light is an important design element that can be used to influence your interior decor in a number of ways. In fact, you can experience a major transformative change on the overall style and ambiance of a room by making a few simple lighting changes. Consider how these ideas can help you to improve the look of your space with great results, and think about ways that you can improve your space by making a few changes.
The Addition of Spotlights
If you have fine pieces of artwork, decorative display areas or other features that you want to illustrate with beautiful clarity, the addition of spotlights is a great idea. You can shine light on these special features in your home by installing a single, bright fixture with a focused beam overhead, or you can use track lighting to highlight larger features. In some cases, the design or layout of your room may be sufficient to allow lighting to be placed at eye-level or even below the fixture to shine upward at it.
Background Illumination
While spotlights can shine a focused beam of light on fixtures, you can also use background lighting for ambiance. Consider how you can incorporate background lighting with under-cabinet kitchen lighting, dimmer recessed lighting placed behind a sofa or other features. Generally, these are lights that do not provide direct lighting, and the light may not be the main source of light in the room. It may even have a hint of color to it for a dramatic flair that further establishes ambiance.
Beautiful Lamps
Another idea is to use beautiful or decorative lamps in your room. These may be smaller desk lamps, towering floor lamps or table top lamps. There are lamps available in a wide range of colors, sizes and styles. The lighting from the lamps may influence ambiance and provide functional lighting, but the decorative nature of the lamps themselves can enhance the décor even when the lights are not turned on.
There are many different types of lighting that can influence your home's décor, and in many cases, it makes sense to incorporate each of these styles of lighting in a single room to enjoy different benefits. You can study your rooms' layouts and designs today to learn more about how the existing light fixtures influence decor, and you can make a few appropriate changes to enjoy better overall results for your space.
When people take out a home loan, it is important to think carefully about how the home loan works. At first, the majority of the monthly payment is going to go towards interest. For example, it is not unusual for 90 percent of the monthly mortgage payments go toward interest during the first year. Then, during the latter part of the loan, most of the payment is going to go towards paying off the principal.
Therefore, it should come as no surprise that a lot of homeowners are looking for ways to reduce the amount of Interest they pay on a home loan.
For example, some homeowners consider putting a larger down payment on the home in order to reduce the amount of money they have to pay in the form of interest. Another possibility involves paying off the mortgage early; however, a mortgage prepayment fee may apply.
What Is A Mortgage Prepayment Fee?
A mortgage prepayment fee is exactly what it sounds like. This is a fee that some homeowners have to pay if they end up paying off their mortgage early. For lenders, they know that a lot of the money they are going to make comes in the form of interest. Therefore, they also understand that if their home loan gets paid off early, they are going to lose a significant amount of money. Therefore, as a way to disincentivize homeowners from paying off their home loan early and posting them interest, they apply a mortgage prepayment fee.
When Will A Mortgage Prepayment Fee Apply?
Of course, it is also important for homeowners to take a look at the contract carefully and see when a mortgage prepayment fee applies. For example, if homeowners are paying one extra monthly payment per year, then it is highly unlikely that a mortgage prepayment fee is going to apply when the home loan gets paid off early. On the other hand, if a homeowner is looking to pay off an entire home loan in 3 years, then there is a high chance that a prepayment fee is going to apply. In order to avoid this mortgage prepayment fee, every homeowner has to take a look at their contract carefully.
Right now is the best time to look at refinancing your home. Even if your current mortgage is as young as a year old, you might find that a refinance is in your best interest.
Be Sure That A Refinance Makes Sense
With today’s rates, refinancing makes sense for many homeowners, but it might not be the right move for you. Depending upon your mortgage, you may pay a penalty if you prepay early. Also, if you’ve paid heavily into your mortgage, refinancing into a new 20 or 30 year mortgage could cost you money over the long-term. The bottom line is to carefully read through your loan documents or even call your loan company to find out the details of the impact of a refinance.
Consult With A Professional
Once you’ve determined that a refinance makes sense in theory, it’s time to talk with an objective professional, i.e., not your loan rep. Seek out a fiduciary, who has receives no gain whether or not you refinance. Have the professional run the numbers so you can see in black and white where you will stand financially after a refinance.
Compare Rates
If you and your financial professional decide that a refinance is the way to go, now it’s time to compare rates. Even with rates at rock bottom prices right now, you’ll find that you might save even more money just by shopping around. Also, remember that if your credit is excellent, you have more negotiating power. If you have a preference with working with a certain company, ask them to match the interest rate you’ve been offered by a competitor.
Protect Your Investment
Now that you’ve improved your mortgage situation with a refinance, it’s time to consider what your heirs will be left with when you’re no longer here to provide for them. Make sure that your loved ones can reap the benefit of your savvy financial planning by taking out a life insurance policy. There are many variations on life insurance policies, so by sure to compare and contrast benefits, terms and rates.
As a homeowner, you should always be on the lookout for ways to maximize your investment. Use these refinancing tips to get the most out of your home’s value.
Last week’s economic reports included readings on inflation, retail sales, and a speech by Federal Reserve Chair Jerome Powell. Weekly readings on mortgage rates and jobless claims were also released.
Inflation Rises as Retail Sales Fall, Fed Says Current Monetary Policy Won’t Change
The Consumer Price Index rose to 0.40 percent in December as compared to November’s reading of 0.20 percent. The CPI measures inflation and the Core CPI measures inflation without the volatile sectors of food and fuel. December’s Core CPI reading fell to a rate of 0.10 percent growth from November’s reading of 0.20 percent.
Retail sales were dampened by the coronavirus, but December’s negative reading of -0.70 percent sales was lower than the -1.40 percent rate reported in November. December sales excluding the automotive sector were -1.40 percent lower in December as compared to November’s reading of -1.30 percent.
Federal Reserve Chair Jerome Powell dispelled fears of rising inflation and said that the Fed’s Federal Open Market Committee will not raise its current federal interest rate range of 0.00 to 0.25 percent any time soon. Chair Powell also said that the Fed would not decrease its purchase of Treasury Bonds as a further measure to stabilize the economy.
Mortgage Rates, Jobless Claims Rise
Freddie Mac reported higher average mortgage rates last week. Rates for 30-year fixed-rate mortgages rose by 14 basis points to 2.79 percent. Rates for 15-year fixed-rate mortgages averaged 2.23 percent and were seven basis points higher. Rates for 5/1 adjustable rate mortgages rose by 37 basis points to 3.12 percent on average. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.
First-time jobless claims rose to 965,000 claims filed last week as compared to the prior week’s reading of 784,000 initial claims filed. Ongoing jobless claims also rose with 5.27 million claims filed as compared to the prior week’s reading of 5.07 million continuing claims filed.
The University of Michigan’s Consumer Sentiment Index was lower in January with a reading of 79.2. Analysts expected an index reading of 79.2 based on the December reading of 80.7.
What’s Ahead
This week’s scheduled economic reports include the National Association of Home Builder’s Housing Market Index and reports from the Commerce Department on housing starts, building permits issued. Sales of pre-owned homes will also be reported along with weekly readings on mortgage rates and jobless claims.
For those who are looking for a new home, it is important to take the time to get this decision right. For a lot of people, a home is the most valuable investment they are ever going to make. As a result, it is critical to evaluate all of the options that are available. That way, everyone will get the most out of their time. What about setting a budget? How important is this and should people think about going over it?
It Is Important To Budget First
When someone is looking for a home, the first step is to know the budget. As a rule of thumb, those people should try to avoid spending more than 30 percent of their monthly income on housing expenses. This is monthly income before taxes. For those who are having trouble doing this calculation, this is an area where a trained professional can provide assistance. That way, everyone will know how much money they can spend on a home after their down payment.
Make A List Of Must-Have and Nice To Have Features
Next, it is important to come up with a list of features they must have and features that would be nice to have. Everyone has to make sure they know what features they want to include the budget. There are some things that homeowners need to have, such as a certain number of bedrooms. Then, there are features that people would like to have but aren't necessary. What happens if someone finds a home with everything? Should they go over budget?
Finding The Perfect Home Is Worth A Few Extra Dollars
In the end, a home is more than just a number on a piece of paper. Because a home is also about intangible values and benefits, it is okay for homeowners to go over their budget slightly for the perfect home because there is a great chance that they are going to be there for years to come. At the same time, everyone also has to make sure they know how far over budget they are willing to go. Then, they can find the perfect home.
For those who are thinking about buying or selling a home during the pandemic, they may feel like this is a difficult task. Even though it is true that this is going to be a challenge, people are able to increase their success rate by adapting to a new environment. When it comes to buying or selling a home during the pandemic, there are a few tips that everyone should keep in mind.
Many Showings Are Going To Be Virtual
Make sure that everyone is ready to provide a virtual tour or go on one themselves. Of course, everyone is currently living in an era of social distancing. Therefore, everyone has to make sure that they do not unnecessarily expose themselves to anyone. Virtual tours are a great way to adapt to this measure while still purchasing or selling a home. For those who are thinking about providing a virtual tour to someone else, make sure to take the time to explore all of the options available. Some software programs are going to be better than others.
Ensure There Is A Safe Way To Buy And Sell A Home
It is critical to think about other safety measures that people can take as well. Everyone has to make sure that they endear themselves to as many buyers as possible. In addition to providing virtual tours, it may also be helpful to provide hand sanitizer. Or, people need to make sure that they bring hand sanitizer. Of course, make sure to wear a mask at all times when someone is going to be within 6 feet of someone else. This is another important safety measure that everyone should take.
There Is Help Available During The Pandemic
Finally, it is also a great idea to note that there is financial help available. Lots of people have struggled during the pandemic. That is why there are financial resources available. Be sure to speak with a trained professional and figure out if there are ways to make the process of buying or selling a home just a little bit easier. This could end up saving someone a lot of time and money during the process.
Do you have a mortgage? You've likely seen or heard a lot about mortgage refinancing as interest rates remained low in recent months.
In today's blog post we'll explore the topic of mortgage refinancing, including when you should consider refinancing and how to take advantage of low interest rates.
What is Mortgage Refinancing?
In simple terms, refinancing refers to the practice of taking out a new mortgage and using the proceeds to pay off your old one in its entirety. You'll go through the full borrowing process with your chosen lender, including the credit check, financial history and employment history in order to ensure that you have the ability to pay your new mortgage – even if your monthly costs are lower.
Depending on your financial goals, you may refinance to tap into some of the equity you've built up in your home, or you may refinance in order to secure a new mortgage with a lower interest rate or better payment terms. Whatever the case, know that if you decide to refinance you'll be engaging with a lender for a brand new mortgage.
When Should I Consider Refinancing My Mortgage?
When you should refinance depends on your reason for refinancing. If you're looking to reduce your interest rate and your monthly payments, you should refinance your mortgage whenever interest rates drop enough that you will be able to save more in monthly payments then you will be paying in closing costs and fees.
Consulting with a mortgage professional is the best way to understand how much money you can save, but to get a quick idea simply take a look at how much you owe on your mortgage, your current interest rate and the types of rates you may qualify for. If you owe $200,000 at 4% percent interest and you can refinance down to 3% percent you're going to save a considerable amount over the long term.
How to Take Advantage of Low Interest Rates
Refinancing your mortgage is a major financial decision and not one that should be taken lightly. Careful research is needed to determine if now is best time to switch up your mortgage to one with a lower interest rate.
