Are you drowning under the burden of monthly EMIs of a home loan? Are the additional monthly expenses preventing you from paying the EMIs on time? Worry no more!! Maybe it is time for you to consider refinancing your home loan.
Refinancing your mortgage is considered to be a smart financial move that allows borrowers to enjoy better loan terms, saving huge amounts of money. However, if you are wondering when should I refinance your mortgage, it is important to understand your financial situation before making the next move. You must mindfully decide if refinancing makes sense financially by weighing the money you will save against the refinancing cost.
When should you refinance your mortgage?
Talking about the general point of view, mortgage refinancing is chosen to get lower interest rates on the new mortgage. It is likely to make sense when you are not losing money in the short or long term. Furthermore, your future financial goals also play a vital role in deciding whether it is a feasible option for you or not.
Here are a few scenarios where mortgage refinancing can be profitable:
1. You are getting lower mortgage rates
Since the interest rates keep fluctuating due to a variety of factors like market movements, inflation, the economy, etc., you must monitor when they are falling down. Going for home loan refinancing at lower interest rates(1% to 2% lower)than your current one is considered to be the most optimal deal. In addition, pay attention to your existing loan term when considering refinance though. If you are in the initial years of a home loan, going for refinancing can prove to be unprofitable. Therefore, do the math and get in touch with a well-experienced financial advisor to decide whether refinancing is suitable for you in the current financial situation.
2. Your credit report has improved
A credit score is the most significant deciding factor when it comes to getting a loan amount granted by a lender. The better your credit score is, the more likely you are to get lower interest rates on the refinanced mortgage. Therefore if you have improved your credit score over the course of time by paying the EMIs on time and clearing off other debts, you can certainly apply for refinancing and get the loan at lower interest rates.
3. You want a shorter loan term
If you have managed to get a consistent cash flow into your bank account and want to pay off the debt quickly, you can refinance the mortgage to a shorter term. However, the borrowers must note that shortening the loan term results in higher monthly payments. This is why it is essential to take a look at your monthly income and expenditure before shortening the loan term through refinancing. Usually, borrowers who opt for refinancing for decreasing the loan tenure without analyzing their finances end up defaulting loan amounts and lowering their credit score. Thus, connect with Preferred Rate to use a home loan eligibility calculator to determine whether you can afford the home loan refinancing at the current movement or you should wait for some time.
Make conscious decisions while refinancing your mortgage to generate profit in the long run!