July 11th, 2020 10:40 AM by Jackie A. Graves, President
Mortgage rates have fallen to unbelievably low
levels, and many borrowers are landing 30-year home loans at under 3%.
If you’re a homeowner with an existing mortgage,
you might want to consider refinancing — even if your current loan is only
a year old. More than 16 million mortgage holders are ripe for a refi,
according to one recent study.
Refinancing at today’s record-low rates could
save you a few thousand dollars a year in interest, and tens of thousands of
dollars over the course of your loan.
If you think it might be time to replace your
mortgage with a new one, here are four tips to make sure you get the most out
of your refinance.
1. Be certain a refi is the right move
Before you commit to a refinance, there are a
few important things you need to consider. Today’s basement-dwelling mortgage
rates may look good on paper, but depending on the terms of your existing
mortgage, you might be subject to loan conditions that could make refinancing a
Some mortgages carry a penalty for early
repayment, especially during the first few years. You also could run into legal
complications if you took advantage of a local government grant program, like
one for first-time buyers.
Before you start looking at refinance loans,
read your mortgage documents carefully to be certain you won’t get dinged with
You also need to make sure a refinance now won’t
end up costing you more in the long run.
If your current mortgage is for 30 years and
you’ve already paid off half of it, refinancing into a new 30-year fixed-rate
mortgage could cost you tens, or possibly hundreds of thousands of dollars in
additional interest. It might be smart to go with a 15-year loan instead.
2. Talk with a pro
The best way to be sure refinancing is the right
decision is to consult with a professional. An online financial planning service will give you
top-of-the-line financial advice without the high fees.
In addition to providing you with advice on your
refi, a certified financial planner can help you create a retirement savings
plan that’s tailored to work with your mortgage.
That way, once your home loan is fully paid off
you can rest easy knowing you’ve already got a chunk of change stashed away for
your golden years.
A simple 30-minute call can get you thinking
about your financial goals and priorities — and how a refinance can help you
3. Compare rates to find the right loan
Some 16.3 million homeowners are sitting on old
mortgages with rates so high that they could save an average $283 a month by
refinancing, according to the mortgage data firm Black Knight.
With mortgage rates so low, you might be tempted
to jump at the first refinance offer that comes along. But shopping around and
comparing rates could wind up saving you even more on your new monthly payment.
You can always do it the old-fashioned way, by
researching local lenders and contacting them individually about their rates —
but that could eat up a lot of time. A better option is to go online, gather quotes from at least three lenders, and compare them.
Do an easy side-by-side comparison of lenders’
interest rates, loan terms and monthly payments, and look at user reviews for
each bank, credit union or loan company to help inform your decision.
4. Protect your investment — and your family
After you choose your new loan, take a fresh
look at your homeowners insurance. Are you paying too much? Go online, get several home insurance quotes,
and make sure you've got the right coverage at the right price.
And while it isn’t pleasant to think about, the
possibility that something unexpected might happen to you — personally — is
important to consider as a homeowner. You want to make sure your family won’t
have to worry about how they’d make the mortgage payments in the unlikely event
of your death.
The best way to make sure your family will be
financially secure is to take out a life insurance policy. The idea of shopping
for life insurance might seem a bit uncomfortable, but a good online comparison site can
make the process painless.
In just minutes, you can find the three best
rates for your family’s specific needs. Depending on how old you are and where
you live, you could find a policy that offers your loved ones $1 million in
financial protection for less than $7 a week.
It never hurts to be prepared. And even though
you can’t put a price on peace of mind, you’ll know that you’re getting the
best coverage available.
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