If you are currently in a home, there is probably the question of whether one can get a better loan in the market. The interest rates fluctuate and the lenders have come up with new products in the market.
Hence, it may be good to check whether refinancing will lead to a lower payment per month than before or whether it will enable the home owner to pay off his/her home earlier than expected.
This blog is a guide on how you can analyze if you should switch to a better mortgage option and here are six ways. Well, let’s continue reading before you look for alternative mortgage financing.
What’s New With Your Credit Rating?
First of all, find out whether your credit rating has changed for the better since you obtained your initial home loan. Loans’ terms and rates depend on the credit score, and higher scores allow borrowers to get better conditions.
Thus, if your number is much higher today than it was before, you most likely can get a cheaper interest rate. It is advisable to get a report or check your score from all the three credit bureaus to get a comprehensive report.
If you’re considering refinancing, a minimum increase of 50 points is a good indicator that you’re eligible to do so.
Has The Home Value Rise In Your Area?
Second, check whether home prices have increased in your zip code since the time you purchased your home. Several regions in the country have witnessed rising property values in the recent past.
For example, loan-to-value on your house could be more favorable now. If your home, for example, is worth significantly more than you paid for it, you should be able to refinance to get rid of PMI or pay a lower rate.
How Much Equity Have You Accumulated?
Also, determine the portion of the mortgage balance that you have paid. Each monthly payment adds more equity as well as a fraction towards the home since you now own a part of the home.
If you have 20% equity or more, you are allowed to refinance your home and do away with your private mortgage insurance. Further, more equity is good because your loan terms will be more favorable since the loan-to-value ratio is lower.
Hence, we can see that building equity can make the way for a cheaper monthly payment.
Is You Can Get Cash Back With A Refi?
Also, consider whether you may require cash for home improvements or any other purpose. But, when the mortgage rates reduce, refinancing enables borrowers to access more cash.
For instance, going down from 4% to 3% as the interest rate, it means that the amount of payment is reduced. You can then decide to maintain the monthly payment the same and reduce the loan duration by years.
Or you can keep the same pace and just cash out a little bit of the money. Be sure to weigh your options in order to avoid falling into a situation where you are the loser.
Has There Been Any Significant Changes In Your Life?
Try to remember the time you acquired your home loan. Has there been any change in your employment, income, marital status, credit, or other major events since that time?
All aspects involve getting married, having a child, or retiring all have consequences on finances. And if your credit score rises or falls, it changes your rates. New details and the income verification will be integrated into the stipulations of the new loan you will receive.
Knowing mortgage brokers NY, ensure that major changes are reported to the lenders since they form the basis of presenting an accurate picture of your situation. Before considering whether or not it is time to refinance, be realistic about future housing plans.
Conclusion
It is prudent for any homeowner to occasionally review his/her mortgage situation. If there have been positive changes in the aspects of credit score, home equity, or regarding the idea of moving, check how refinancing can help get a better deal.
In general, you may wonder whether you are eligible for better rates and terms that can decrease your monthly payments or the cost of your home loan in the long run.
