If you want to save on your loan’s interest and cut years from your loan term, refinancing your mortgage can be an excellent option. For some people, it’s not easy to know when the right time is. Just because you’re seeing that mortgage rates are gradually going upward, doesn’t mean you will need to refinance in an instant.
So, what are the signs that you should refinance a mortgage?
3 Signs That You Should Refinance a Mortgage
- When you have improved your income and credit score. Although you might have been approved for a loan with bad credit, that doesn’t mean that you need to get stuck that way. You should also work on improving your income and credit score. Doing that will make you qualified to get a refinancing fast. Keep in mind that the higher your credit score is, the better. However, it is still up to the lender if you’re credible to be approved for a refinancing. Typically, you can still get approval if your score ranges from 600 to 700. In addition, a noticeable increase in your income can also be advantageous. It can be utilized when you’re refinancing a shorter loan. Imagine converting a 15-year mortgage to a 5-year term. It is absolutely an excellent way to save thousands of dollars in your monthly mortgage and interest. It is important to the lenders that you have a more stable income that will help cover the bigger expenses.
- When you’re worried about adjustable-rate mortgages (ARM). One thing that may keep you worried is the going up and down of the adjustable mortgage rates due to the varying market conditions. The frequency of adjustments is typically based on the loan type that you have. Some ARMS may adjust once every five years, while some others adjust after several months only. When it comes to adjustable-rate mortgages, you may pay lower interest and incur lower monthly payments based on your loan term. However, there can be times when the loan is adjusted, and you’ll notice that the interest rates have increased significantly. If you opt to have an interest-only loan, the payments will surely increase after the initial repayment schedule ends. If you’re worried that you will not afford your payments after a loan is adjusted, it will be better to switch to a fixed-rate mortgage.
- You’ve got a home equity line of credit (HELOC). Millions of homeowners in America have been into their home equity during the time of the housing bubble. You may be alarmed that you’re almost close to its anniversary date. Generally, home equity loans are customized to let homeowners pay interest only in the initial 10 years. After that, borrowers must also commence paying the loan’s principal because HELOCs mainly have fluctuating rates of interest. In that way, their monthly payments can double or even triple. Sadly, not everyone can keep up with these high payments. If you’re one of them, you may be at risk of defaulting the loan and may result in foreclosure. Refinancing can be a solution to get lower interest rates.
Refinance Experts in Michigan: Mortgage City
There are different benefits of refinancing; that’s why it is a smart decision to look for a way to pay off the loan fast and with better interest rates. If you’re considering getting refinancing, make sure that you consider the signs mentioned in this article. You can also consult a reputable mortgage company to help you.
If you need help to refinance your mortgage in Royal Oak, Michigan, make sure to contact Mortgage City. Our professional team is dedicated to providing top-notch service to our clients. Contact us today at (248) 930-8709 to schedule a FREE consultation!
