When
you fall back on your monthly mortgage payments due to lack of cash flow, don’t
you wish you had control over the mortgage rates? Well, certainly you would
think of that but alas we all know that it won’t be possible. However, although
you don’t have control over the mortgage rates, it is true that you have enough
to control while refinancing your mortgage, especially in 2020. Not being able
to make monthly payments, the fear of becoming homeless might instigate you for
a refinance in 2020 but what are the reasons why you should think ahead of
refinancing this year?
Check out some of the ways in which thinking ahead about
refinancing can help you crack the best deal.
- The need to make a significant down payment: If you wish to snag the most competitive rate on your mortgage refinance, you first have to make sure whether or not you have sufficient down payment. Most lenders will ask you to pay down at least 20% of the total loan amount and if you can’t make it to 20%, you might qualify for the PMI or the Private Mortgage Insurance, which insures the lenders against a possible default by the borrower. Remember that a bigger down payment will give you a healthy cushion, thereby leaving you with less chance of finding yourself underwater on the mortgage.
- Look out for prepayment penalties: It often happens that when you took out the first mortgage loan, you were going through poor financial condition but now you’re better off. Your improved financial health might prompt you to make more payments apart from the scheduled monthly payments. Although this will make you debt-free sooner and help you own your home before the actual time, you have to watch out pre-payment penalties. Lenders often charge you penalties when you pay before time. This can be a great obstacle.
- Try to keep your credit score in great shape: Getting a mortgage with a poor credit score is like a distant dream in today’s market. Hence, when you wish to refinance your current mortgage in the near future, make sure you keep your credit in good shape by making timely payments and not spending above your credit limit. With a poor score, chances are high that you will qualify for higher interest rates.
- Keep maintaining your home: Just as with a first mortgage loan, the second mortgage loan lenders will look for an equity cushion between the amount that you’re borrowing and the value of your home. Hence, it is always better not to let the value of your home deteriorate if you wish to get a low rate on your to refinance mortgage loan.