Consider These 5 Tips Before Refinancing a Mortgage

Want to refinance your existing mortgage? With interest rates rising continuously, now is the best time to switch to a fixed or variable rate. There are many reasons to refinance, including securing better loan terms, lowering monthly repayments, or getting the most out of your home equity. Whatever be your refinancing requirements, working with a trusted mortgage broker Abbotsford can help. 


Before choosing to refinance your residential mortgage, you should be well aware of the process involved and follow the tips that can help you secure better terms and interest on your mortgage.


1. Determine Your Refinancing Goals


The foremost thing to consider is determining why you need to refinance, understanding your expectations, your current scenario, and the terms and conditions you are looking for. Once you can determine your needs, choosing an ideal refinancing deal will become a lot easier. Some of the common reasons homeowners choose to refinance are:


  • Lowering monthly payments

  • Lowering interest rate

  • Flexible loan terms

  • Qualify for a different type of mortgage

  • Getting rid of mortgage insurance


2. Switching Your Refinance Type


There are different types of refinancing available and you can choose the one that best meets your needs and goals. It's advised to do proper research before choosing the right type as there is no one-fit approach in refinancing. The types of refinancing options you can choose from include:


  • Rate-And-Term Refinance

  • Cash-Out Refinance

  • Cash-In Refinance

  • Streamline Refinance

  • No-Closing-Cost Refinance


3. Improve Your Credit Score


Credit score plays a great role in determining the rates and mortgage amount you are eligible to apply for. Before applying for a refinance, check your credit score. The credit requirements vary depending on the type of loan you want to apply, but in most cases, it’s important to maintain a credit score of at least 620. To improve your credit score, pay your bills on time and avoid taking new loans.


4. Reduce Your Debt-To-Income Ratio


Do you have an existing mortgage or any type of loan you are already repaying? If yes, you need to reduce your debt-to-income (DTI) ratio to ensure a better refinancing deal. DTI is the percentage of your gross monthly income that goes toward debt payments. 


If your DTI ratio is higher than 43%, you seem to overextend your financing limits. You can considerably lower your DTI by paying off your debt or creating additional income streams.


5. Compare Multiple Offers


Never refinance before conducting research and comparing with other lenders. It’s advised to shop around and compare the best loan or mortgage offers from different lenders to receive the best terms and rates. An expert Abbotsford mortgage broker can help you find the best terms on your refinance. Here few things you should always check when choosing the best offer:


  • Interest rate 

  • Loan terms

  • Monthly mortgage payments

  • Closing cost details

  • Amortization period


If you are looking for a trusted mortgage broker in Abbotsford who can help you seal a profitable refinancing deal, Satbir Bhullar is here for you. He specializes in residential and commercial mortgages, along with refinancing and renewals. Discuss your goals to get started with your refinancing application.


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