Refinansiering – Yes or No


The decision on whether to refinance your mortgage or not depends on your financial situation and goals. It’s common to lower interest rates or cut the repayment period. Still, there are also many not-so-good reasons to take out another loan. While refinancing can often be the right answer to your financial struggles, it can also be dangerous, especially if you’re unfamiliar with its pros and cons.

You need a valid reason to replace your new loan with the new one. And if you could match your current situation with favorable market trends (for example, when interest rates go down), it would be a score. But you should always think deeply about refinancing, as it’s not always the best option. So do your research before making any final decisions.

On the source below, learn about good reasons to refinance:

Reduce Interest Rate

If you are considering refinancing your mortgage, you may consider the costs associated with this venture. They include interest and a variety of fees which can add up to a loan amount.

The interest rate on a new loan can be fixed or variable, depending on your financial goals and current market trends. For example, suppose global interest rates are falling. In that case, it’s probably the right moment to switch your fixed-rate mortgage with an adjustable-rate loan. That’s the best way to save money on your installments, as they will be lower.

Over the loan lifetime, you can save thousands of dollars on interest payments. But keep in mind that refinancing can take several years to earn back the fees you pay upfront. So you may want to consider refinancing if you plan to stay in your home for a few years. In that case, you’ll be safe and sound with a fixed-rate mortgage, as there’s no risk of installment skyrocketing.

Pay Off Loan Faster

Many people face a question: Can you pay off your mortgage faster? While most people can get rid off their loans earlier, some lenders make it difficult to do so because they get less interest. So they usually charge a so-called prepayment fee, something like a ‘penalty’ which is the lender’s way of punishing you for denying them additional earnings.

Before making an early payment, keep prepayment fees in mind. Talk to your initial lender about this cost. A high penalty could deplete your savings on interests by making early payments. So if this penalty is too high, refinancing can be a better option.

You can use a new loan to get rid of old debt fast. Plus, you can use this new line of credit to boost your credit score and enjoy some benefits because of that. And finally, you can opt for a cash-out loan and get some extra money for various purposes.

Skip a Payment

Whether you’re considering a new mortgage or want to change the term of your current gjeld, skipping a mortgage payment can make financial sense. But, no, it’s not the same thing as if you miss or pay your installment after due. Instead, you make a tactical move after agreeing with the lender.

In general, skipping a mortgage payment is possible if you’re on a low mortgage balance, have a low loan-to-value ratio, and have never missed a single installment. You should also meet a few other requirements to take advantage of this benefit, including no recent bounced checks or late payments. In these cases, you can skip a mortgage payment when refinancing without causing too much harm to your credit.

The money you saved from skipping one payment can go toward the principal on your new loan. What’s even better is that this action won’t hurt your credit. But this option won’t work in all cases. In general, when you refinance your mortgage, the next payment you owe will be due on the first of the month after closing.

Is This Legit?

In some cases, lenders will advertise that you can skip a mortgage payment when refinancing. It’s like having a short break. But while it sounds like a great option, it’s important to remember that the payments you’ve missed are still owed.

Your lender grants you a grace period, and it can happen anytime. Both principal and interest you’ve missed will be added to the remaining amount of the refinance debt. So you’ll probably pay a higher installment, but that increase is usually modest and negligible.

Another way to skip a mortgage payment when refinancing is to set up an escrow account. Usually, the funds to set up this account will be part of the closing costs, so you won’t have to send the money to the mortgage company. Once the refinancing process is complete, the rest of the money deposited in the escrow account will be returned to you within thirty to sixty days after the loan closing.

Improve Your Credit Score

Refinancing can be a great way to improve your credit score. Check this page for more tips on how to boost this parameter. In fact, it’s a cause-and-effect relationship. The better your credit rating, the greater your chances for more favorable refinance terms. And when you meet your obligations on time and have no missed payments, it favorably affects your credit rating.

A good credit score can increase your refinance options, lower your interest rate, and unlock other benefits. So you must be aware of this parameter before applying for a new loan. First, check your credit report for any mistakes or identity theft. Then shop around for good deals at different lenders. It may be a tiny ding on your credit report, but it will likely be minimal compared to the savings you will receive in the long run.

The decision on refinancing should never be made hastily. If the benefits and savings of refinancing are tangible and quickly noticeable, go for it. But if you have second thoughts because you don’t want to risk with a new loan, it’s best to wait or consult an expert to help you with this decision.