A lot of people consider refinancing their home loan to take advantage of lower interest rates. Refinancing can indeed save you a lot of money, but it can be a complicated business too. So remember the following tips before you put your right foot forward:
- Exit fees: Carefully check the terms and conditions of the existing loan before you decide to refinance. This is because some lenders will impose penalties if you leave before the loan term is over. This is known as exit fees. Heavy penalties in the form of exit fees might render refinancing meaningless. Exit fees might vary depending upon how long you have had the loan.
- Shop for the best lender: You have no obligation to refinance by borrowing from your current lender. Contact multiple lenders in order to get yourself the best deal. You can also contact mortgage brokers to know current mortgage refinance rates. Compare the rates and make sure that you do not end up accepting the first offer that comes your way.
- Do not ignore your existing lender: Sometimes staying with your current lender can be the best decision. You might approach them saying that you have got great refinancing offers from other lenders. To keep your business, they might come up with a good offer.
- Settle for nothing less than what you want: You are willing to take the trouble because you are not happy with the current rate or mortgage terms. But refinancing involves a lot of complications. So do not agree to anything less than your expectations. Remember that you can’t refinance again for a certain period of time.
- Consider the extra costs involved with refinancing: There might be a host of extra fees associated with refinancing. These include closing costs, exit fees etc. Take these fees into account and then decide if it is viable to refinance your home loan.
- Borrowing from home equity: If you have some equity in your home then borrowing against home equity is often a pretty effective idea. Refinancing with a home equity loan usually results in a low interest rate and longer repayment period. Both will suit you perfectly. Also note that many people take a debt consolidation loan to refinance their mortgage.
- Home loan professionals: If you are not too confident about refinancing yourself then consider hiring a home loan professional. He will analyze your situation, find you the best deal, and do all the work on your behalf. Life will get a lot easier for you.
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