With the present status of the US mortgage market, the Federal Reserve has decided to purchase some mortgage-backed securities in order to boost the US economy that is still lagging behind. As the mortgage rates have again fallen, most homeowners are rushing to refinance their mortgages. Most people are not even checking the home mortgage rates before choosing to refinance their home loans. With the low mortgage rates, should you refinance your home mortgages now? There are some important factors that need to be considered before taking the plunge into refinancing. Here are some things you should consider.
- When should you consider refinancing your mortgage?
Refinance usually deals with taking a new mortgage to pay off the original mortgage. The homeowners pay off the old mortgage with the help of this new home loan. Some valid reasons of seeking a home mortgage refinance is to seek lower interest rates, adjusting the terms of the mortgage or even changing the loan program type. Homeowners might consider refinancing their mortgage if it will help them save money in the long run. Check the refinancing fees so that you do not end up losing more money.
- What happens if your outstanding balance is more than your home value?
For all those struggling homeowners who are facing huge financial difficulties, refinancing may not be their cup of tea. You then have to look at it from the view of a lender. Look at the difference between what you owe to the lenders and what is the current value of your home. If you have enough cash at hand and you know that you’ll be staying in that house for the next few years, then you may make the decision of refinancing after checking the home mortgage rates.
- What happens if you’re self-employed or you have taken a second mortgage?
There are different ways of handling the process of refinancing if you’re self-employed. Very few lenders will want to deal with you if you do not have a fixed monthly income. But, if you have a good credit score, payment history and if you can pay down a large amount, then getting a refinance mortgage will not be a big problem for you. Another condition is if you’ve already taken a second mortgage, you may again run into some difficulties. Before refinancing your first mortgage, the holder of the home equity loan or the second mortgage must subordinate the second mortgage to the new first mortgage. If you’re facing any of these two situations, it is better that you go to a mortgage broker rather than a bank.
Therefore, if you’re a struggling homeowner who is unable to make your mortgage payments, consider refinancing your mortgage after considering the current home mortgage rates. Take into account the above mentioned considerations before plunging into refinancing your home loan.