Tips to Saving Money by Refinancing Your Mortgage

Financial issues often get in the way and hamper us as we try to fulfill our dreams. Refinancing your mortgage is just one way of getting the chance to achieve those dreams with confidence.

What does refinancing your mortgage do? It can lower monthly interest payments. A refinanced mortgage can also consolidate debts and pay off other loans faster. You can sometimes use the equity to take out money if needed. Refinancing a mortgage works well when interest rates are low. You can save on interest rates during the life of the loan as refinancing at the right time would make the rates drop.

If this ‘refinancing your mortgage’ sounds good to you, you may also be wondering, “Is there a way to save money while refinancing my mortgage?” The answer is, yes. Here are a few simple tips to help guide and inform you:

1. Pay Lender Costs – Do your homework on costs. Sometimes there are costs like private mortgage insurance, legal fees, and closing costs. By paying costs and points, more of your payment can go to the principal reduction per month.

2. Improve Credit Score – Has your credit score improved since you originally got the loan, and how are your savings and income holding up? Are they strong? While refinancing your mortgage, refrain from using credit cards or opening new accounts. Check your credit score and make sure all is satisfactory. If there is something not right, fix what needs to be fixed.

3. Prepare for an Appraisal – Not always necessary for refinancing mortgages, an appraisal will help you if your home is worth more than what the lender stated.

4. Plan what you are going to do with the saving each month. Stick to the plan, so you don’t spend the savings. Take advantage of the grace period between the old mortgage payments and the beginning of the new mortgage payments by paying off a credit card or home repair (for example.) Refinancing a mortgage creates a new home loan to replace an old one.

5. Consider the Mortgage Term - Research the available terms of a mortgage, and get a term that works for you. Consider a fixed-rate mortgage, as this will help you budget finances and save money.

Taking the information on refinancing mortgages, and the five easy tips above, you should have an easier time choosing the best financial solution for your situation.