You knew it was bound to happen sooner or later. Historically low mortgage rates are set to rise. Have you missed out on the best deals? Perhaps now. If you’re in a position to refinance into a lower rate, here’s why you should take advantage of a refinance while rates are still low:
Rates aren’t going to rocket up exponentially, but they are looking to increase steadily over time for the foreseeable future. If you’ve been waiting for the right time to make a move and refinance, now would probably be a good time.
Of course, it’s always a good idea to consult with a financial planner and do your own research to see what the rates are, and then jumping on a good deal as soon as it’s available. But taking steps beforehand to make sure you’re financially good-to-go is a smart decision, so that you can react quickly while rates are at their lowest.
One of the things that surprises most people about refinancing their mortgage is that when rates drop, there’s suddenly a surge of applications to try and lock in those lower rates. As it takes time to go through each of the applications, you could be relegated to the bottom of the pile if you didn’t get your application in soon enough.
Before you submit an application, however, make sure that you’ve checked your credit reports and that you have all relevant documentation ready. That way, when you’re watching the markets and spot a great opportunity, you’ll be posed to ensure your application is at the top of the list.
Depending on your specific situation, refinancing into an ARM (Adjustable Rate Mortgage) or a shorter loan term may make better sense, since they typically come with lower starting interest rates than a fixed rate loan. This is particularly helpful if you aren’t planning to stay in the home for the length of the fixed-term loan.
Another option may be to refinance into a shorter term fixed rate loan if you can afford to do so. Rates are lower with these types of loans, and thanks to the shorter time frame, you’ll save more money over time.
You can optionally pay points on your mortgage before your loan closes. These points are a way to permanently lower your interest rate. One point equals 1% of your loan amount, but keep in mind that you won’t always have the option to pay entirely in points, particularly if the market is in a bit of a rollercoaster phase. The best time to pay points on your mortgage is when the market has settled down and is more stable.
And although these mortgage refinance tips aren’t all of the ways to save money when refinancing, they can nevertheless give you a good starting point and some ideas to consider in order to make the most of your money and your homeownership.