The specter of layoffs and an imploding labor market have plunged millions of Americans into a period of fear and uncertainty. More and more families are struggling to make ends meet, and everyday homeowners are at risk of foreclosure. However, a sluggish economy also presents a rare silver lining. Near-zero interest rates mean that now is the perfect time to refinance your mortgage.
A mortgage refinance basically entails replacing your existing home loan with a new mortgage that has a better interest term and rate. If you have a good credit history, you can swap out your variable-rate mortgage for a fixed one, and secure lower rates at the same time. But it’s not a one-size-fits-all solution for all homeowners.
If you’re having difficulties making your mortgage payments, you might want to consider refinancing. However, you need to make sure that refinancing is the right decision to make.
- Go to multiple lenders
Although interest rates as a whole have trended downward, rates still differ from lender to lender, depending on factors such as the number of applications and the federal target interest rate. To ensure you’re getting the best deal possible, you might want to approach multiple lenders and compare rates.
Refinancing can be tricky and confusing, and many people prefer to do business with their old loan officer. Many people also assume that interest rates are the same regardless of the lender. You can look at a mortgage website and compare rates. If the rates for a particular lender aren’t listed on the website, you can call them directly.
- Check the fees
Just because one lender’s rates are lower doesn’t mean it’s the best option for you. They could compensate for the lower rates by charging higher fees. A lender with slightly higher rates but lower fees could mean bigger savings for you.
You also need to ask about any associated fees you have to pay when refinancing your home. Ask for an itemized list of all fees if possible. In certain cases, refinancing with your original lender can translate to lower costs since you don’t have redo certain parts of the process such as home appraisal.
- Read up on the closing process
A mortgage refinancing isn’t as simple as walking into a lender and signing a few forms. The entire process could take at least a month or even longer, depending on the number of applications. Make sure you’ve completed all the necessary paperwork and the new escrow account has been settled. After closing the deal, you have three days to cancel the renegotiated terms without penalty.
- Lock in the rate
One common mistake many homeowners make is failing to lock in their desired rate as soon as possible. Mortgage rates are refreshed on a daily basis, so if you’ve found a rate you’re willing to settle for, lock it in as soon as possible. A rate lock allows you to secure your desired rate for up to two months, more than enough time to close the deal.
Refinancing your home can lead to bigger savings and lower interest rates. While it might not be an option for everyone, these pointers will help you navigate the refinancing process and decide whether it’s the best choice for you.