This article is about 4 Ways To Lower The Cost Of Your Mortgage Refinance. If you are planning on refinancing your mortgage then you need to know these 4 ways to lower the cost. Mortgage refinances are very expensive if you do not know what you are doing, so follow these 4 methods to lower the cost over the course of your loan.
Avoiding PMI(Private Mortgage Insurance) is huge when it comes to saving money from your refinance. The reason PMI exists is to cover the lender in case the house was overvalued or drops in value in the future. Lenders require mortgage holders to get PMI when they are about to borrow more than 80% of the homes value. Remember this is the homes value, not homes equity, these are two very different things.
Short Term Loan Over Long Term
The reason getting a short term loan is in your best interest is because short term loans always have a lower interest rate and you will have your house paid off sooner. What does this mean to you? This means that you will end up saving tens of thousands of dollars just by paying off your mortgage early as opposed to the traditional 30 year loan. Most people think that a 15 year mortgage is double the normal 30 year loan and it’s not, the average payment is roughly 1.7 of the normal 30 year mortgage payment.
Pay For Points
Most people have never even heard of this and that is what makes this method so effective. What lenders don’t like the general public to know is that you can actually pay more upfront to get a lesser interest rate. That is why it is called paying for points. When you get a loan you also get points which is the interest rate, now in order to get a lower interest rate lenders like to see some cash up front. Paying for points is totally separate from a down payment, the down payment goes towards the house and the points payments is more geared towards the interest.
Short Term Credit Repair
Nearly 50% of all people who refinance their mortgages don’t have a clue about what their credit report looks like and this is a very costly mistake. If you want to save the most money on your refinance you need to fix any blemish you have on your credit report as long as close any inactive accounts. The reason you need to fix any blemish is so you can help increase your credit score.
The higher your credit score the day the credit report is ran the lower your interest rate will be. Another way to increase your credit score almost instantly is to increase your credit card limits. The reason this works is because you lower your debt to credit ratio which in turn increases your credit score.
When it comes to your home there is always a way to save money, and refinancing your mortgage is no different. Just by utilizing these 4 methods you can save thousands over the course of your loan.