Be Prepared – 10 Things You Should Ask Before Refinancing Your Mortgage

April 05, 2012     Written by Administrator

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Most struggling homeowners today are looking for a way to lower their mortgage payment by refinancing. However, refinancing may not benefit everyone even though it is a great way to save money. Before you proceed, be prepared to ask the following 10 questions before refinancing your mortgage.

Top Questions to Ask Your Mortgage Lender (and Yourself) before You Refinance:

Don’t make the mistake of refinancing your home mortgage loan without asking these very important questions first.

  1. Will I get a lower interest rate? If your interest rate will not drop by at least 1 percent, it is probably not a good time to refinance your mortgage.
  2. Can I get cash out for personal expenses? Refinancing to pay for a college education or might be a good idea instead of borrowing the money from elsewhere.
  3. Will I reduce my overall expenses? Refinancing might also be a good idea if you are able to reduce your interest and monthly mortgage payments. Refinancing your mortgage should help you lower your monthly payments as well as your interest rate.
  4. Will I be able to increase my monthly payments to shorten my loan period? Doing this can help you lower your total interest rate (paid over the life of the loan) by reducing your rate and the term of the loan, for example, refinancing from a 30-year loan to a 15-year mortgage.
  5. I only have a few years left on my mortgage, is it a good idea to extend the term of my mortgage? It is not a good idea to extend the term of your mortgage, especially if doing this will increase the number of years left on the loan.
  6. Will I have to pay pre–payment penalties? To be certain, check with your lender first to see if there is a penalty for paying off your current mortgage early.
  7. My credit score has dropped, will this affect my refinance? If your credit rating has declined, this will affect your interest rate and will also determine your eligibility for a refinance.
  8. Should I go with an Adjustable Rate Mortgage or a Fixed Rate loan? ARM or Adjustable Rate Mortgages are cheap right now but are very risky. If you want to play it safe, then a fixed rate loan is the way to go.
  9. Can I shop around and negotiate a better deal? Some mortgage lenders may be willing to negotiate. However, you may still want to shop around to get the very best deal out there.
  10. Do I have the time and energy to commit to a refinance? Refinancing your mortgage requires time and money. If you do not have the time to research, shop around and put in the extra time necessary to get the best deal, then put it off for now until you have the time to do so. You don’t want to overlook important details and make any mistakes.

Have you refinanced your mortgage lately? What was it that you wish you had known before you refinanced? Please share your experience with us.