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Mortgage refinancing provides a new mortgage that replaces and pays off your old loan. While determining when to refinance a mortgage can be tricky — but it's best to do it if you will benefit financially. If your financial situation has changed, it's a good time to consider refinancing. Mortgage refinancing can help you set up a new loan structure that better fits your current situation. Here's when to refinance your mortgage:
Lower interest rate
It is worth refinancing if mortgage interest rates are low because lowering your interest rate by a percentage may save you some money in interest over the life of the loan. For instance, refinancing could make financial sense if you can lower your mortgage interest rate by 1% to 2%. In contrast, if mortgage interest rates are high, it may be a good idea to wait to refinance.
Shorten your loan term
It makes sense to refinance into a shorter-term mortgage if you can pay off your mortgage sooner due to increased income. However, while you can secure a lower rate with a shorter term, you'll have a higher monthly payment. Therefore, you must ensure that your budget can handle the higher payments.
Lower DTI ratio or a higher credit score
Debt-to-income (DTI) ratio and Credit score are the factors that affect mortgage rates. If you want to refinance your mortgage into better rates and terms, you need to be better off financially. The best mortgage rates are meant for those with a 740 credit score and above. In contrast, the lower your debt-to-income ratio — the lower the percentage of your monthly income used to pay your debts. Try to keep your debt-to-income ratio below 43%; it could help you get a lower refinance rate.
Switch your loan type
It's time to refinance your mortgage if you have an adjustable-rate mortgage with a lower initial fixed rate, but now that the initial period has ended. Interest rates on ARMs can go as high as five percent above the initial rate, which can make or break a loan.
Get rid of mortgage insurance
You can refinance your mortgage, get a new loan, and eliminate private mortgage insurance if your home has increased in value. This can lead to significant savings over time. Similarly, if you have a Federal Housing Administration loan (FHA) and put down less than 10%, you can refinance into a traditional loan to remove your FHA mortgage insurance premiums and lower your monthly costs. Again, refinancing into a traditional loan helps you eliminate that extra monthly cost.
Contact Us For Mortgage Refinancing FL
Here at Savvy Mortgage Services, we provide a wide range of mortgage refinancing options to meet the needs of borrowers in Florida. So if you're ready to move forward and work with a Florida mortgage lender who can look at your goals and determine how you'll benefit from mortgage financing, please get in touch with us at 786-527-0200 to discuss the benefits of mortgage financing, and get a quote.