With Low mortgage rates continuing to drop to unbelievably low levels, and many borrowers landing 30-year home loans at under 3 percent, it’s no wonder that homeowners with existing mortgages are considering refinancing—even if their current loan is only a year old. After all, refinancing at today’s record-low rates could save a few thousand dollars a year in interest, not to mention tens of thousands of dollars during the course of a loan. Think it might be time to replace your mortgage with a new one? Here are three tips to make sure you get the most out of your refinance.
1. Be certain a refi is the right move
Today’s historically low mortgage rates might look good on paper, but you could be subject to loan conditions that could make refinancing a bad call. It all depends on the terms of your existing mortgage. For instance, 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 consider refinance loans, read your mortgage documents carefully to be certain you won’t get hit with exorbitant fees. Also, 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 your professional loan officer. Not only can they provide you with advice on your refi, they also 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, you can rest easy knowing you’ve already got a chunk of change saved for your golden years. A simple 30-minute call with your loan officer can get you thinking about your financial goals and priorities—and how a refinance can help you achieve them.
3. Protect your investment — and your family
After you choose your new loan, take a fresh look at your homeowner’s insurance. Are you paying too much? Be prepared to get several home insurance quotes to make sure you have the right coverage at the right price. And while it isn’t pleasant to think about the possibility of something unexpected happening to you personally, it’s important to consider as a homeowner.
You want to ensure that 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.
