Monthly Money Saving Mortgage Refinance Tips

Have you been a successful homeowner for a while now and had your personal financial situation improve from when you first qualified and received your mortgage? If your intention is to stay in your existing home for a few more years, it might be time to look into refinancing into a lower rate, which could save you a modest amount of money each month on your mortgage payment. Review the following tips and see if any of the addressed scenarios apply to your current circumstances.

  • Have you recently received a promotion or new job, which will result in a higher income? Consider refinancing your mortgage to a shorter term. Your monthly payments will be higher, yet you will be able to pay off the loan more quickly and you will build equity in the home much faster.
  • As you pay your monthly mortgage payments on time and in the full amount each month, your credit score will most likely go up over time. You may want to consider refinancing your mortgage. This is because your increased credit score may qualify you for a better interest rate and financing terms.
  • Did you know that your mortgage interest payments, property taxes, and various other fees are tax deductible? Be sure to ask your accountant about these deductions to ensure that you take do not miss the opportunity to get this money back on your tax return.
  • If you are planning to apply for a mortgage, you most likely understand the importance of checking your credit report for inaccuracies. What you may not understand is that it is a good idea to check your report at all three major reporting agencies (e.g. TransUnion, Experian, and Equifax), as they may not all have the same information.
  • When applying for a mortgage, lenders will look for stability. For example, showing that you can hold down a job, or that you have lived at your current residence for many years, will give lenders confidence in your ability to repay the home loan and make them more willing to extend you credit.
  • Do you have a savings account? Consider applying for a mortgage with the lending institution where you have such an account and disclose this information during the application process. Lenders may be more willing to extend credit to those who save with them, as these reserves act as a security to fall back on in the event that you default on the loan.
  • Consider a number of factors when buying discount points. While these points act as prepaid interest (e.g. 1% of the mortgage amount per point), they may not be worth it in the end. For example, if trends show that interest rates will drop in the coming months or if you plan to move within the next year, it may not make sense to spend money on these points.
  • If you make biweekly payments, you will end up making 26 payments in a year rather than 12 if you were to pay monthly payments. While this may save you in interest and help you to pay off your mortgage faster, you may find it beneficial to have an extra month’s payment for other expenses. Consider this when deciding upon a payment structure.
  • Did your lender promise you something, but when it came time to sign the loan documents, the promise was nowhere to be found? Written agreements supersede anything that you may have been told. That is why it is important to get anything and everything in writing. If you have questions or concerns, make sure to address them prior to signing any documentation.
  • Have you qualified for a loan that is larger than you expected? This does not mean that you have to spend it. In order to avoid getting yourself in over your head in monthly payments that you cannot afford, finance reasonably. The more affordable your house payment, the more you will have in cash reserves to save or spend on other things.
  • When saving, do not forget to take into consideration closing costs, origination fees, and other charges involved in home buying process. Be sure to ask your lender if they can help you estimate what they may be. If you do not have the fees when they become due, this could delay the process.
  • It is important to save up money for your down payment well before you initiate the home buying process. Being forced to take out a loan for your down payment is a sign that you are not financially ready to own a home. Try to cut back in your spending and save as much as possible.
  • Anything you can do to reassure the lender that you are creditworthy is worth considering. Think about creating a budget outline. This will include the monthly payment of your potential mortgage, bills, and other expenses such as gas, groceries, etc. This will help to give the lender a better idea of what you are capable of affording.

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