The Many Different Ways to Refinance Your Loan

Written by: Jennifer Watkins

Refinancing your loan, mortgage, or whatever else is obviously going to be an incredibly important process that you need to undertake. The important thing is to make sure that you do what you need to do in order to maximize your rates during a refinance so that you get the most favorable rate that you can possibly get.

Seize Your Opportunity

When rates are looking food, the key is to move on them as fast as you can. Many experts say that the time to refinance is now since these rates are looking good and continuing to move in that direction. It’s too dangerous to sit around and wait for the rates to top off because you could very easily misfire here and end up missing out on a positive rate and instead have the positive upward movement pop around you.

Be Ready for Drops

That being said, it’s also important to try to make sure that you’re ready in case you do experience a drop. Going fast for refinancing right now will help to make a drop less likely, but it could happen anyway. The key is to make sure that you’re ready for this to happen. You need to be in line, ready to lock in a rate ahead of others so that if the dip does happen, you can get that rate immediately before it really starts to go sour on you.

What you can do to ensure that this is the case is simply have everything filled out, make sure your credit score stays positive, and keep your eyes peeled for any kind of change.

Credit Score

Keeping your credit score ready to go for when you want to lock in your refinancing rate is going to involve all the usual things that you would think, including paying everything on time, for example. However, it’s also going to include doing what you can to improve your rate by looking at the reports from agencies. The thing that many people don’t often know about these reports is that they are sometimes wrong.

The reporting agencies are by no means infallible. So, it would help tremendously to aid your credit score if you went on these reports and checked to see if there are any mistakes. Then, you can write these agencies and report the mistakes and get them changed. Maybe you have a report of a missed payment that you didn’t even miss. This could really be repressing your score, and it’s not fair that it does so. If you can appeal to the credit report companies, you may be able to get the report changed.

Plus, if you make a deal with whatever institution reported the missed payment in the first place, you may be able to get them to get rid of the report in exchange for paying the missed payment immediately, if you really did miss it. You can always challenge anything on a credit report that you know is incorrect. Just make sure that you have a way to prove it, and that you report it to all three of the major credit report companies.

Shorter Terms

If you go for a shorter term than something like a fixed rate over 30 years, you will often get a lower rate. Therefore, you’ll save money over the term by paying less interest on the loan. If you can afford it, then it’s definitely worth doing since you’ll definitely be saving money on it.

Upfront Payments

Another option that you definitely have is to pay points on your mortgage right upfront. This means putting money upfront in order to permanently make your loan interest less. If you want to save money in the long run and have the money to help with this now, you can absolutely throw some cash for points. In general, one point is going to be about 1 percent interest. Depending on the particular loan, you may not be able to pay all the points or even that many. It all depends on your loan and what state that the market is in. If the market is unstable, then you will often have less of an ability to do this or the points will be more expensive to buy. However, stable markets mean that it can certainly be a good idea.

Adjustable Rates

Another approach you can take is switching to an adjustable-rate mortgage. If the rates are rising, then an ARM approach will help since it will give you a lower initial interest rate than something is a fixed rate. The experts on the issue say that this is especially useful if you’re only planning on staying in your house for as long as the fixed term for the loan that you’re going for. Obviously, there are downsides to this type of loan, but it makes a lot of sense to try it out based on those initial lower interest rates if you fit the right situation for it.

Other Approaches

If you’re already in a situation now where you have an ARM and it’s not working for you, then refinancing out of it could make sense in order to go to a fixed rate. If you have more of a fixed income, then you may want a fixed rate, in other words. However, there could also be other situations where you want a fixed rate as well. There are other possibilities here too, like going with more than one mortgage and connecting them together.

Overall, the key is to look at all of your options in order to pick the best one. This is something you can’t do if you don’t know what the potential options are. The solution to finding your perfect loan is definitely out there, it’s just a matter of making sure that you put the time in to find it.


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