Remortgaging your property can be a good way to gain access to some of the money you have invested in your real estate, or it can be a good move financially as you could pay lower monthly premiums. It isn’t always a good idea, however, and Colorado Professionals Title in Highlands Ranch would like to offer a few questions you ought to ask yourself before committing to anything.
Why am I refinancing?
If you are looking to liquify some of your assets (perhaps to pay for home improvements, or to help a child afford the deposit on their first home) then your focus should be on securing the sum you need (avoid borrowing more just because you are able to!) at a reasonable rate of interest. If you want to pay lower monthly premiums, you are looking to find a deal with a significantly lower rate of interest than you are currently paying.
Is it the right time?
Consider whether you will be keeping your property for long enough to make the costs associated with refinancing worthwhile. If you owe less than around $30,000 it may not be worth taking on the extra costs.
It may be the case that the interest rates offered are higher than when you acquired your first mortgage, in which case it would be a bad idea to refinance!
Your current mortgage deal may carry hefty prepayment penalties, so be sure to check with your lender to find out whether refinancing is a viable option for you.
Have I found a good deal?
There are a number of factors to consider when weighing up a lender’s offer. Make sure you take into account the following:
- Fees and points – there may be a number of fees attached to a refinancing deal, not all of which are stated obviously. ‘Points’ are fees paid at closing and, roughly speaking, they tend to be lower the higher the rate of interest you are paying. Ask any potential lender for a breakdown of their fees in dollars so you know exactly what you’ll be paying them.
- Down payment/private mortgage insurance – many lenders require that borrowers either put down a large deposit (usually around 20% of the value of the property) or else require that they purchase mortgage insurance. Be sure to ask if you are obliged to pay for insurance before signing any deals.
- Rates – of course the rate of interest you’ll be paying is extremely important, as it dictates how large your monthly repayments will be. Ask your lender for the annual percentage rate, which takes into account fees and other charges.
If you’re buying or selling a property, you’ll want an experienced legal team by your side. Colorado Professionals Title can offer guidance, and we also specialize in title insurance in Highlands Ranch. Call (303) 268-4278 to find out more.