Looking to lower your interest rate and get your loan paid off sooner? Then it might be time for you to consider refinancing.
Refinancing increases available funds as your monthly loan payment decreases with a lower interest rate. With a lower payment, you can use extra funds for retirement savings, paying other debts, saving money for college, or other purposes. Before you start the process, here's a few tips to help refinancing go as smoothly as possible:
Is the purpose of refinancing to lower the interest rate, reduce the monthly payment, lock in a fixed monthly payment, reduce the remaining term, or get rid of PMI? The type and terms of the mortgage refinance needed will depend on which of these—or which combination of these—goals is in play.
Based on the above goals, set targets for interest rates and monthly payments. Decide on the mortgage term and whether to apply for a fixed or adjustable-rate mortgage. Our mortgage refinance calculator can help define these parameters.
In particular, find out if it has changed since you last applied for a mortgage. A low credit rating will affect the interest rate and the availability of a mortgage refinance.
A drastic drop in property value can make it difficult to refinance a mortgage unless that mortgage is old enough to have been paid down substantially.
Some mortgages have penalties for early repayment, which may hurt your chances of refinancing. This is not necessarily a deal-killer, but it is important to know the penalty amount and measure it against the potential savings from refinancing.
Mortgage rates and lending standards vary from lender to lender, so it is well worth researching multiple mortgage lenders. Ask lenders for full disclosure of points, closing costs, and other fees. This will help you conduct an apples-to-apples comparison between mortgage lenders. For example, the lender offering the lowest interest rate may charge the most for points. When you pay "points," you pay interest in an upfront lump sum to get a lower rate on your fixed-rate mortgage. Each point costs 1% of the mortgage amount. The more points you pay, the lower your mortgage rate. So, which is right for you? More points and a lower rate? Or fewer points and a higher rate? Try to request quotes with as nearly identical terms as possible for comparison purposes.
Lenders can't offer the same rate indefinitely, but they may commit to locking in a rate for a reasonable period during the application process.
Be sure to carefully compare mortgage refinancing quotes to your existing mortgage. There will likely be a trade-off between paying upfront expenses to refinance a mortgage and achieving savings in subsequent monthly payments. It is important to make sure the savings in monthly payments will, in time, adequately compensate for the upfront costs. See our mortgage calculators
Ready to take the next step? BBVA Compass offers a variety of home refinancing options to help you achieve your goals:
A BBVA Compass fixed-rate mortgage offers safety and security by keeping your monthly principal and interest payments the same throughout the term of the loan.
Government loan programs can also make refinancing your home a little easier. These programs may offer options such as low down payments, low closing costs, and easier qualification.
Adjustable-rate mortgages provide initial cost-savings and can be a good deal if you plan to stay in your home for a relatively short period of time.
Let us help you refinance your first mortgage, so you can reduce your monthly payments and save money. Contact a Mortgage Specialist today!
How do you know if you should refinance your mortgage and what is the best way to do it? Find everything you need to know to make a decision.
Thinking of refinancing before rates jump? Hold your horses. Make sure to consider these 8 questions before you refinance.