The past year has been a year of surprises, changes, and constantly adapting. It has been the same for mortgages too. Is your mortgage term ending? Is it time to think about refinancing, or are you wondering if that is the right choice for you? Let’s look at what refinancing can do for you and any tips for refinancing in 2021.
What is refinancing a mortgage?
Refinancing is still the same now, as it was before. It is when a borrower renegotiates the current loan and selects new or better terms. The new mortgage loan should improve the borrower’s finances. Mortgage refinancing pays off and replaces the first loan. The new, refinanced mortgage will usually have lower loan payments. You are allowed to refinance as often as you need to, but make sure it makes sense financially.
What can refinancing a mortgage do?
Refinancing a mortgage can reduce your monthly interest payments. A refinanced mortgage can also quickly pay off other loans and consolidate debts. If you need to, you can use the equity to cash out money. This helps in the case of sudden needed repairs, or education fees. However, digging into your equity is not recommended when applying for refinancing but it can provide much needed financial relief. Refinancing a mortgage can save you money, build equity, and pay off the mortgage faster. Refinancing a mortgage works well when interest rates are low. You can save on interest rates during the life of the loan as refinancing at the right time would make the rates drop.
What about refinancing in 2021? Is now the right time for refinancing for your home? Here are some tips if you are planning to refinance this year.
Tips for Refinancing in 2021
- Find the best rate for you.It’s ok to shop around and compare fees instead of choosing the lowest rate. You can also ask each lender for a loan estimate to help with your choice. Lower interest rates simulate the economy through refinancing. So by doing this, you are not only helping you, you are helping the economy.
- Try to find a lender who offers underwriting upfront. Underwriting is the verification process of the applicant’s financial information. The housing market is still competitive, and if a lender will offer underwriting upfront, it ensures the best rate available for the borrower.
- Refinance to create lower monthly payments so you can create a financial cushion. Even the slightest reduction in rates can create significant savings.
- Know why you are refinancing to the right loan for your situation. Do you need a lower payment, shortened term, replace current loan with a fixed-rate loan, or borrow from your equity? Those are just a few things to consider.
- Refinance to lock in a low rate for longer, save money. Make sure this is possible by speaking to your mortgage lender, as there are some lenders who will not lock in until later in the underwriting process.
- Keep in contact with your mortgage lender. Maintaining contact with your lender, and supplying any of the requested documents or information when needed, will keep the mortgage refinancing process moving smoothly. Consistent communication with the lender can help ensure your credit is protected and you aren’t charged with late fees, if Covid-19 has impacted your life in some way.
- Check your credit score. Your credit score is a major factor lenders take into account with any mortgage. Check your score before asking about refinancing your mortgage. Make sure all of your accounts are up to date. Also, make sure your credit score stays solid until the refinanced mortgage process is finalized. It is a good idea to avoid taking on any new debts as this can slow the refinancing closing process. It can also cause a mortgage to fall through if it changes your financial standing.
Keep in Mind
It isn’t the best idea to refinance if you are going to move in the near future or flip the house. Refinancing your mortgage will work well if you plan on staying in your house for at least five more years. Make sure your credit is good enough, or you can get it good enough, to qualify for a refinancing loan. If your credit needs some work, maybe now is not the best time and speak to your lender for options. Refinancing may be difficult if you are planning to use your home’s equity to take out cash.
It is a good idea to talk things over with a trusted mortgage broker, and our mortgage brokers are up to date with what is going on this year surrounding mortgage refinancing even during the Covid-19 era and can provide you the help you need in getting your mortgage refinance approved. You can rest assured that after speaking to one of our mortgage broker, they will have the most current insight into your financial situation and be able to find the best mortgage refinance option that would work best for you.
As everyone’s financial situation is unique, our mortgage brokers can provide you with advice and a solution that works best for you. Don’t wait contact one of our mortgage brokers today to discuss your refinance your mortgage options.