The last housing bubble has left many people afraid of getting loans for their houses, in fear of foreclosure, once the market crashes. While there is some validity regarding this claim, now is the perfect time to get a house through mortgage, especially since the economy is stabilizing.
Interest rates for mortgages are low and stable, making it suitable for home purchases with minimum interest rates. If you are one of the people who has taken advantage of this in previous years, then you might have noticed how interest rates have gotten lower recently due to the stability of the economy.
A number of factors are said to be responsible for the decrease in interest rates, and reasons such as the country’s economic performance, the Treasury’s bond decision, timing, the consumer market, and many others.
It is important to note the interplay of these factors is normally the determinant of how interest rates will go for a certain period, but these may vary from one state to another. Because each state is governed by different sets of laws, interest rates may be regulated differently depending on policies enacted by the government.
With this in mind, interest rates may go down a few years after you’ve taken on a mortgage loan, which is why it might be best if you consider refinancing your mortgage to get the interest rates for your loan which are lower than the existing one.
There are many reasons why mortgage refinance remains as one of the most popular options for borrowers. Mortgage refinance schemes can be flexible, given that some lenders can give you the option to switch your payment term from a fixed-rate term where you must stick with your payment schedule regardless if you have the capacity to pay your debt in bulk, to an adjustable rate term where you can occasionally pay varying amounts, depending on the agreement between you and your creditor. With this in mind, mortgage
1. Low-Interest Rates – the Treasury bond issues revisions in interest rates occasionally and if you have taken a mortgage loan over the past years, then you may take advantage of lower interest rates today. Mortgage refinance schemes offer borrowers lower interest rates wherein in some cases, you can save as much as 2% from your interest rates.
That’s roughly a few hundred dollars you can save per month when you switch from principal mortgage loans to refinance loans, and also, you can use this money to cover for your other expenses.
2. Equity Cash-out Payments – most lenders approve mortgage refinance applications from borrowers who have high equity on their property. You can take advantage of the appreciation of your property’s value by applying for a mortgage refinance and in turn, have the creditor pay you for this equity. In that way, you do not only get to switch to monthly payments with lower interest rates, you also get some cash which you can use to spend on other investments and expenses.
While these reasons may seem to make mortgage refinance appear all peaches and cream, it also has its own share of disadvantages. These disadvantages stem from extrinsic factors which you have little to no control of. For one, you may face the risk of getting a lower appraisal value for your property.
Appraisers may assess your property to have a lower value than you expected it to be, and this can mean that you will be getting a lower grant for your refinance application, making this move a gamble. To prevent getting a lower value on your property, you should try and maintain its structural integrity and preserve its prime condition.
In that way, you will be experiencing less depreciation in value in case the fair market values of properties in your area will depreciate. Mortgage refinance applications can also mean you have to shell out some of your money to pay for some initial services which will be rendered such as the appraisal of your property. Since loans are also considered as an investment, paying for service fees won’t guarantee you a loan approval.
Lastly, the application process can also be a bit tedious, given you have to fulfill or meet certain criteria to qualify for the refinance plan. These disadvantages can be minimized if you know how to play your cards right. Plan a strategy in advance to ensure you will get a better chance of loan approval.
Read more tips on how to get your loan approved and research the requirements you need to fulfill from your prospective creditors to increase your chances of getting your loan approved.
With those benefits in mind, getting your loan approved requires you to employ strategies which will give your lender’s trust and confidence in you. There are some things you need to know which can help you formulate a good strategy and increase your chances of getting approved. For one, you should know what the criteria for loan approval is, while making sure you meet them. Some of the things that lenders look for in a borrower include:
1. Good Credit Score – creditors usually prioritize loan applicants with good credit scores. Good credit scores indicate you were able to pay for your bills and credit responsibilities on time in the past, and the numerical value of good credit scores range from 700 and above. If you have bad credit, don’t panic, since it is only one piece of the entire puzzle.
You can still apply for a refinance loan even if you have a bad credit score, but just keep your expectations low. If you borrow money with bad credit, then you might get a lower loan value or you may get your desired value but at a higher interest rate.
The higher interest rate will serve as the creditor’s protection against the risk of lending you money, given that your score may indicate that you might have a hard time paying back your debt.
2. Proof of Timely Bill Payment – receipts of bills and rent transactions over the past months must be kept if you have plans of applying for a mortgage refinance. Bills which were paid on time can tell your lender that you are responsible when it comes to paying your bills and that you can also do the same for your loan amortization.
Make sure you have paid your bills on time in the recent months to show your creditor you will do the same with them.
3. Proof of Income – ideally, your monthly amortization should not exceed 40% of your monthly income. Your income can help lenders predict how well you will be able to pay for your debt, in case you get approved. The higher the income, the higher your chances of getting a loan approval will be, especially if the percentage which the amortization is in proportion with your salary is lower.
With these factors in mind, you can now try and get the approval of your mortgage refinance loan from your prospective creditors. How you fare in each of these qualifications can ultimately determine if you will gain approval with the best deals or not, so it’s in your best interests to strategically plan to enhance your chances of getting your loan approved.
Getting a mortgage refinance can be challenging, especially if you have little to no idea on how this works. If you are reluctant to get a mortgage refinance, yet you are finding your mortgage payment and interest rates to be a bit more expensive, then you should know that mortgage refinance schemes can give you a number of benefits.
First, it can offer you lower interest rates than your principal mortgage, especially if you qualify for it. This can help you save more money which you can use on other expenses. Second, mortgage refinance creditors can also grant you a home equity payout, especially if your property has high equity and has greatly appreciated in value.
As you get your loan approved, you can also switch between payment plans, depending on the policies made by your lender. If you want to have a high approval rating, you must play well with the cards that you have in hand. Lay out your best hand on the table and show them how serious you are with your loan.
As you get your loan approved, it pays to know how to allocate your funds to avoid delays in payment and property foreclosure altogether. Follow us today for more lifehacks and tips to ensure your financial growth and stability.