Refinancing is one of the ways of getting a new mortgage with the aim of paying off the current mortgage or to reduce the monthly payments or interest rates. It also is a process that can help obtain cash out of a home for large purchases. Refinancing can also be an avenue worth considering when thinking of changing mortgage providers.

In most cases, mortgage refinancing is something that some people consider when they have significant equity on their home. For others, this is a move they consider because their financial situation has changed.

What You Should Know Before Refinancing

If you are bogged down by your current mortgage but you are not in a murky place financially, then you can consider refinancing so that you can settle it while also managing to get better terms and interest rates. It is an excellent option if you have a variable mortgage because you can convert it to a fixed one or opt for a slightly larger payment plan but with favorable terms and lower interests. If you have a less than desirable credit score, less than perfect finances, or too much debt, then taking the mortgage refinance route can be risky.

In as much as refinancing does have its benefits, it also has its drawbacks that are worth a second and perhaps third thought before opting for settling for such an option. Nevertheless, knowing the signs that tell you it is time to refinance is essential so that you enjoy the financial flexibility that comes with such a move. With that in mind, below are some of the major signs to watch out for:

1. Interest Rates Have Taken A Dip

The type of mortgage, with reference on the interest rate plan, can influence your decision to consider refinancing. If you have an adjustable rate mortgage and you were doing okay only to discover the rates are projected to skyrocket, then you may need to refinance it to a mortgage with a fixed rate. With such fixed rates, you are protected from the instabilities of the interest rates that may arise due to different economic factors. The move to refinance to a fixed rate mortgage gives you better financial control thus allowing you to even build your home’s equity as well as your credit score.

2. Growth In Your Equity

If you can increase your home’s equity, then thing may be headed to the point where you need to revise your mortgage and perhaps consider refinancing the mortgage. The principle behind this is an increase in the value of your home directly results in the growth of the home’s equity. According to most experienced mortgage financiers, you should have built your equity by at least 20% before you can consider refinancing your mortgage so that you can avoid the private insurance. So, keep track of your home’s equity so that you know the ideal time to refinance the mortgage.

3. A Good Credit Score

The ideal move when considering to refinance your mortgage is to eye a low interest rate. However, bagging such low rates is not that easy because this does not happen randomly. For starters, you should be keen on your credit, and that means being responsible when making your financial decisions so that you ensure that you are paying your debts on time. If you are at that point where your credit score is good (at around 680 points or more), then it is a sign that you should revisit your mortgage and possibly consider refinancing it since you have better chances of accessing low interest rates.

4. Homeownership Plans Have Changed

When looking into the prospects of refinancing your mortgage, you should consider your homeownership. In most cases, opting to buy a house is a matter of making a long-term investment. However, plans change, one thing leads to another, and you soon find yourself thinking of selling your home. In such an instance, refinancing is not a bright idea because you are expected to meet the closing costs when you refinance your mortgage and these can be a few thousand dollars. So, if you assess your future plans against your home ownership prospects and are sure that you will keep the house on a long-term basis, then you may want to refinance the mortgage.

5. You Can Pay More

As you push to grow and develop your professional life, that move may also come with certain rewards such as promotions as well as a fatter wallet. That increase in your finances places you in an ideal position to re-evaluate your debt to see how fast you can clear some, which is the right move. And if you can manage to save some money when settling your most considerable debt, which may be on your house, then why not opt to refinance the mortgage. If you can pay more, then a slightly larger payment may not be such a burden since it comes with low interest rates and doable terms that can see you save thousands of dollars.

6. Shaking Off A Bankruptcy

When your business seems to be on its death bed and thing is forthcoming and bankruptcy looks imminent, such as experience can be damaging especially when it comes to accessing future funding for personal or business needs at affordable terms. If you hit bottom and are bouncing back from bankruptcy and it is about seven years since, you then may be light at the end of the tunnel for you.

That phase of your life when bankruptcy was all that run in your mind is erased even on your credit report. Therefore, its negative impact goes with it and you are presented with a fresh start. You can refinance your mortgage if are in a financial position to and the current one took on a high-interest debt during your bankruptcy. With the negativity of the bankruptcy blotted out of your credit report, you may have better chances of accessing different mortgage products that have better terms.

The Takeaway

All in all, it is possible to open doors to great and better financial opportunities when you opt to refinance your mortgage. And this looks even more promising if you get to land a favorable refinance deal at the right time. So, as you keep track of the signs mentioned above, also brush up on the topic of mortgage refinancing so that you are better informed. Also, take the time to consult with a mortgage professional who has an impeccable reputation so that you get expert points and advice that will see you make financially sound mortgage decisions.

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