- 10 Aug, 2023
Mortgage Refinancing: Is Now the Right Time to Lower Your Rates?
An opportunity to reduce your monthly mortgage
payments
Mortgage refinancing is a way to get a new mortgage plan to replace the existing one with a lower interest rate. This is a favorable option for those who are looking to secure lower interest rates and reduce their monthly payments.
Would you say no to saving thousands of dollars over the life of your mortgage? Definitely a big no!
If you’re a homeowner and have a mortgage plan running already, and wondering if now is the right time to obtain mortgage refinancing, keep reading the blog as we cover the current role of refinance rates, assess the current financial situation, the importance of 30-year mortgages and several mortgage market trends.
- Joe Mays
Mortgage refinancing - How does it work?
In simpler terms, mortgage refinancing is the process of replacing your current mortgage with a new one but with better terms of payment with much lower rates. The ultimate goal is to save costs over the mortgage period. Let’s get to understanding the way it works;
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Take a look at your financial situation
Assess based on the factors like credit score, income, home equity, and the current balance of your present mortgage. -
Do your homework and compare rates
It is important to stay updated about the current mortgage rates so that you can compare them to your existing rates. Understand the economic climate where you live as mortgage rates might fluctuate based on factors like inflation, and monetary policy decisions. -
Understand your objective behind refinancing
Ask yourself this question (Why am I looking at mortgage refinance options?) and determine the goals such as to reduce total interest paid over the mortgage term or to access equity for other financial needs (Cash out refinance)? This gives you a guide in your refinancing options. -
Prepare & gather documentation
Mortgage lenders need your up-to-date documentation, so make sure you get your documents organized such as recent pay stubs, tax returns, credit reports, and your property information. -
Choose a lender & Submit application
Once you have all the perfect documents and knowledge of refinance rates and mortgage options, go ahead and choose a lender to submit your application for refinancing. Watch out for the lender's fees and other closing costs associated with your refinancing application.
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Property appraisal & Underwriting process
To assess the value of your home, there will be an appraisal conducted to determine the amount to be offered based on the current property value. Later on, your application will be reviewed by an underwriting team to understand your risk profile and check if you qualify for their lending criteria. -
Approval status and closing terms
Once your application is approved, your lender will provide you with a document of loan terms, interest rate, monthly payment, and conditions. Review this carefully and before the closing process. This involves signing legal documents, paying closing costs and fees, and finalizing the new mortgage agreement. -
Pay off the current mortgage
As you have successfully procured a mortgage refinance, the funds from your new loan are used to pay off the existing mortgage. This process effectively replaces the old mortgage you have with the new one. -
Start your payments
As your refinance is complete, you will now begin making payments on the new loan as per the agreed terms.
The role of refinance rates
Refinance rates help borrowers identify possible benefits of refinancing. They represent interest rates offered by lenders of new mortgage loans. They are not the same and keep changing on a daily basis. More about 30-year mortgage rates are broken below:
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The current 30-year fixed mortgage rate is 7.40% compared to last week and remains unchanged due to certain economic conditions.
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If you tap into this opportunity and refinance using 30-year mortgage rates, there are chances to lower your monthly payments. The interest rates might be a bit higher compared to a shorter loan term.
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Most homeowners prefer to go for a 30-year mortgage rate loan due to its low monthly payments spread out over a longer period.
30-year mortgage rates are influenced by certain economic factors and when the market is in a favorable condition, homeowners can lock in their most affordable interest rates, and create a chance to reduce overall mortgage costs.
Did you know that compared to 2021, when rates reached a record low of 2.65%, current mortgage rates are considerably higher?
3 Easy ways to assess your current financial situation
Before considering refinancing options, you should spend some time assessing your present financial situation. Here’s how you can get started:
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Get your existing mortgage papers and review them, including the interest rate, remaining loan balance, and monthly payments.
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You can now calculate how much you can save through refinancing by using online refinancing calculators to estimate your refinance benefits.
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Input data such as your current loan details and potential refinance rates to find out a rough figure of your total savings over the lifetime of your mortgage.
Mortgage market trends
The changes that take place in the mortgage industry are due to a rise in inflation rates, the unemployment rate, and federal decisions. As a homeowner, it is essential that you understand these changing trends and stay up to date. Here’s how you can do that in 2 simple steps;
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Follow financial experts & economists who provide insights about the direction of interest rates.
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Read mortgage market-related blogs, and subscribe to newsletters to balance these predictions to know about economic trends and uncertainties that can impact your rates.
Final Thoughts
To succeed in your refinancing journey, make sure you are prepared for a thorough review of your financial history and creditworthiness to get a smooth approval and enjoy the benefits of reduced monthly payments.
The 30-year mortgage rate option is a wonderful opportunity for homeowners to lower their rates, and save big on interest costs. Continuous monitoring of refinance rates is necessary as the right time to do mortgage refinancing differs from one individual to another. Gather as much information to aid in your decision-making process and make the move. Wishing you all luck in your refinancing journey.
