With the Federal Reserve taking longer to reduce our mortgage costs than we had all anticipated, many smart homeowners are casting their net to find their best home loan deal.
Around 350,000 Americans are coming off their five-year, fixed-rate mortgage deal this year, according to research from Ice Mortgage Technology. So, plenty of lenders are looking to scoop up new business with a good deal.
You have two basic choices when seeking a new loan.
You can return to a fixed-rate deal, which will be set around today's mortgage rate. Alternatively, you can opt for an adjustable-rate mortgage, which would give you some relief when interest rates finally fall.
Remember, once a borrower's fixed-rate deal expires, they move on to an adjustable-rate arrangement.
Below, I've given you some tips if you're ready to review your mortgage arrangement.
- Seek professional advice: Consult with a financial advisor or mortgage professional to discuss your specific situation and explore the best refinancing options for your needs.
- Shop around: Don't just stick with your current lender. Compare rates and terms to ensure you're getting the best deal.
- Understand your loan: Review your current agreement with your lender or broker. Ask the simple question, “Can you do me a better deal?”
- Check credit score: A higher credit score can qualify you for lower interest rates. Take steps to improve your credit record before applying for refinancing.
- Explore refinancing: Compare your current adjusted rate with prevailing market rates. Even a slightly lower rate will reduce your monthly payments and long-term costs.
- Loan modifications: Extending your loan term can reduce your monthly repayments. However, you will pay more in the long run because of extended interest rate charges.
- Discount points: Buying discount points at closing can reduce your monthly payments. Usually, each point costs 1% of your loan amount and lowers the rate by less than 1%. However, this only works if you want to stay with your lender for the long term.
NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.
