4 signs it’s time for a new mortgage in the new year
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Your mortgage is probably your biggest debt, and chances are it also comes with your biggest monthly payment. Since this loan is so large and you’re paying it off over such a long period of time, it’s important to make sure you have the best possible mortgage for you.
This isn’t just true for those who haven’t bought a home yet. Current homeowners can maximize their loan by refinancing and getting a new mortgage to pay off the old one. There are four key signs that it might be time for you to pursue this option in the new year, so be on the lookout to see if this applies to you.
1. Your interest rate is too high
Mortgage rates have repeatedly reached record levels during the COVID-19 pandemic. This created an unprecedented opportunity for homeowners to refinance a loan at a lower interest rate.
Although you should consider closing costs to decide if refinancing makes sense, many homeowners could reduce their monthly payment by hundreds of dollars and could save thousands on total interest paid over the term of the loan. If you are able to significantly lower your rate by refinancing, you should take the opportunity to do so.
2. Your monthly payment is too high
Refinancing can lower your monthly payments if you lower your interest rate. It may also reduce your payment amount if you switch to a longer repayment term. Say you have 21 years left until your mortgage is paid off and you refinance into a new 30-year loan. Because you’re giving yourself an extra nine years to pay off the loan, your monthly payment will drop significantly, especially if your new loan has a lower rate.
However, refinancing into a loan with a longer payment term would mean paying interest for longer. In many cases, even if you lower your rate, it would mean higher borrowing costs over the life of the loan. But if you’re really struggling to manage your cash, it might be worth having more wiggle room in your budget now.
3. You want to take equity out of your home
Rising home prices have helped many homeowners increase their home equity. If you pay off your mortgage over time, you may also have accumulated a lot of equity.
Having so much cash trapped in your home may not be a good thing if you have pressing financial needs. Although you can take out a home equity loan or a line of credit to tap into your capital, the interest rate on these types of loans tends to be higher than the rate on your primary mortgage.
Therefore, a cash refinance loan could be a good solution if you want to take some of the money out of your home and put it in your pocket for other things (like paying off higher interest debt). or improving your home). Remember, however, that when you take a cash refinance loanyou’re taking a big risk and putting your house on the line. Don’t borrow against your house unless it’s for a very important reason and you’re sure you can repay the loan.
4. Your customer service is poor
If your lender is making your life difficult, there’s no reason to stay with them. Poor customer service can mean anything from incorrectly processing payments to not offering features you care about, such as bi-weekly mortgage payments. Ultimately, with so many choices of mortgage lenders competing for your business, there’s no reason you should continue to borrow money from a lender who hasn’t earned your loyalty.
If you come across any of these signs that it might be time for a new mortgage in the new year, check out our list of the best mortgage refinance lenders to see what low rates you might qualify for.