And, it can take quite a while to really start significantly paying down the principal balance of your loan. That is because, especially for the first few years of payments, the vast majority of your monthly payment amount goes toward paying interest, not principal.
If you own a home, you may currently be at the point where you are considering mortgage refinance. But, what is a mortgage refinance, when should you do it, and how can you get the best rates?
What Is A Mortgage Refinance?Simply put, a mortgage refinance is when you pay off your existing mortgage with a new mortgage loan, sometimes also called a refinance loan.
The advantages of refinancing vary from person to person, but can include: a better interest rate, lower total cost of the mortgage loan, lower monthly payments, paying off your mortgage more quickly, and/or cashing out on some of the equity in the home.
When It May Be Time To RefinanceThere are a number of signs that it may be a good time for you to refinance your mortgage, including, for example:
- you notice that interest rates have dropped in recent months or years, as compared to when you took out your mortgage
- you have equity in your home (i.e., the value is higher than what you owe on your mortgage) and you want to cash some of that out
- you are now able to make higher monthly payments than previously, and you would like a new mortgage with a shorter repayment period (of say, 15 years instead of 30 years) in order to reduce the total cost of your mortgage
4 Tips For Refinancing at Best RatesYou are going to want to get the best interest rates with your mortgage finance. Refinance home loans the right way at the best rates with these 4 tips:
- Ask for lender referrals from friends and family: Word of mouth referrals can be a wonderful thing. Tell friends and family you trust that are thinking of refinancing your home and ask if they are working with a lender whom they have been pleased with. Start a list of any names they come up with.
- Do your online research: Do some online research for mortgage refinance home loan lenders and build a list of at least 4-5 additional lenders who seem to be offering good rates.
- Apply to all of them: Next, apply to all of the lenders. This will not hurt your credit score, since you are doing it at around the same time and for the same type of loan. It is easy to want to go with the first lender that makes you a loan offer, but do not stop with your first offer.
- Keep negotiating: Even after you identify the best offer among all lenders, do not stop there. Instead, ask the 1-2 of the best offer mortgage lenders if they can do even better. Remember, you can always walk away.
Follow these 4 tips to find the best rates on refinancing your home loan.