Getting a refinance of your mortgage may seem like a great idea to help you get a better deal on your home loan. That is what you hear from everyone, but how true is it? How will you be able to know if getting a mortgage refinance is the right thing to do?
This blog post will shed some light on what you need to know about getting a refinance on your mortgage. Hopefully, after reading this, you will be able to walk away with more information about the subject and make an informed decision as to whether or not refinancing is right for you or not.
How Do You Know When a Mortgage Refinance Is a Good Idea?
The point of getting a mortgage refinance is getting a brand new loan that will have more reasonable loan terms and (ideally) a lower interest rate than your original one. You may be wondering what happens to your original mortgage at this point. Don’t worry! You won’t be stuck having to deal with two mortgages.
The lending company will pay off the original loan, and you will be given a new mortgage with updated terms that should be more reasonable to you. This is the primary reason why people choose to get a refinance, either to get a better deal on their interest rate or to shift to a different mortgage provider.
Who Qualifies for a Refinance?
The thing is, not everyone may qualify for a home refinance. One of the most common criteria to meet is that you have to have continued with your original mortgage for at least a year before they would even consider your application. They will also consider your income-to-debt ratio and see how it would factor in handling a new mortgage. Lastly, they will also consider your credit score and the equity that you already have on your current home.
Is There a Right Time to Refinance?
Take note that there is a right and wrong time when it comes to refinancing. You should never think of getting your mortgage refinanced if you are looking into buying a new car or see a designer bag that caught your eye in the mall’s weekend sale. These are not sound financial decisions that may get you into more debt later on. The only correct time to think about refinancing your mortgage is when you feel that you can get a better deal on your interest rate and loan terms.
Is Getting a Refinance Considered Risky?
Many financial risks accompany getting a mortgage refinance to dip into the equity on your home. You are taking an extremely risky gamble if you are thinking about getting a refinance to buy a new car. However, it may be an excellent decision to get a better deal and loan terms that will better fit your financial situation.
To avoid getting into financial trouble, looking into your mortgage refinancing options and shopping around for the best deal is critical. Also, making sure that you are taking out the refinance for the right reason will ensure that it will be a good financial decision for you in the long run.
If you are looking for refinancing options or apply for a home loan, come to Global Key Capital! We are dedicated to helping all our clients find the best rates and guiding you throughout the entirety of your financing journey. We help each client reap the rewards of finding the perfect lending solution. Contact us today!