Why you should refinance your mortgage instead of waiting for a deferral and renewal of foreclosures

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Do you weigh the options between refinancing your mortgage and ditching your mortgage? Here’s what you need to know about why refinancing may ultimately be the best option. (iStock)

Biden administration recently announced that he will take steps to extend the federal moratorium on evictions, and leniency protection which are currently applied for home loans. The move is an effort to help both homeowners and renters who have been negatively impacted by the pandemic and who are struggling to cope with their monthly payments.

However, if you are looking to save on mortgage payments or get your home equity out of the way, waiting for those renewals might not be the best option. Instead, it may eventually make sense to refinance your mortgage. With that in mind, we’ve listed a few things homeowners need to know before weighing these two options.

If you are ready to explore mortgage refinancing options, visit Credible to compare rates and mortgage lenders

Refinancing can lead to long-term savings

When you look closely at mortgage refinancing and when giving up a mortgage, you can see that one option is long term and the other is for short term relief. If you decide to cancel your mortgage, your payment will be temporarily suspended. However, at the end of the abstinence period, you will have to revert to the existing mortgage terms.

On the other hand, when you refinancing, you irrevocably change the terms of the loan, replacing it with a new one. This means that if you can save money by providing a lower interest rate, you will be able to receive lower payments for the life of your refinanced mortgage.

When you’re ready to know how much your monthly payment might change, use online mortgage refinancing calculator to help you determine what your new monthly payment might be at today’s low refinancing rates.

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Refinancing allows you to take advantage of today’s low mortgage rates

It is impossible to ignore the fact that today mortgage rates are at an all-time low. IN average interest rate 30-year mortgages are currently only 2.98%, according to Freddie Mac. If you can take advantage of these refinancing rates, you can undoubtedly be able to save on mortgage interest. However, you cannot do this if your loan is currently on hold.

Unfortunately, there is usually a waiting period after the end of abstinence before you can take steps to refinance your existing loan. Experian says you should do at least three consecutive mortgage payments before you can refinance a regular loan that has been deferred. However, the expectation may be different if you have a government-backed mortgage, such as an FHA loan or VA loan. In the latter case, you should call your mortgage lender to discuss your options.

If refinancing makes sense to you, visit Credible to get preliminary bids in just a few minutes without negatively impacting your credit score.

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Refinancing can help you pay off your mortgage faster

In addition to being able to take advantage of record low refinancing rates, refinancing can actually help you pay off your mortgage earlier than if you were lenient. Simply put, when refinancing, you have the option to upgrade from a 30-year mortgage to a 15-year mortgage, which can help you achieve your goal of paying off your mortgage earlier.

However, with leniency, even if your mortgage payments temporarily stop, you cannot miss them entirely. Instead, any payments you missed on your current mortgage are usually added to the end of your loan, which means your loan has been extended longer than you originally planned.

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The essence

After all, abstaining from mortgages should be an option that will help people in times of severe financial distress. If you’ve lost your job due to a pandemic and are completely unable to handle mortgage payments, patience can be a worthwhile option. However, if money is tight but you can still pay off your current mortgage, you may want to consider refinancing instead. Mortgage refinancing can do more good and ultimately serve you better in the long run.

Visit Credible to Connect with Experienced Mortgage Lenders who can answer any questions you may have about the refinancing process.

Have a financial question but don’t know who to contact? Write to a safe money expert at moneyexpert@credible.com and your question can be answered by Credible in our Money Expert column.

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