Mortgage refinances have been in vogue in the Beehive State for a long time. Some homeowners are even deemed as serial refinancers in light of the frequency of their applications and approvals.
If you are planning to refinance your mortgage in Utah, understand that it requires a lot of circumspection. This option is never for the fickle and the imprudent.
Refinancing a mortgage is getting a new lease, so everything re-starts because the amortization schedule goes back to month one. If you are happy with your current loan, applying for a refinance may not be worth the trouble. But if you like to explore it further, the things below are what you should consider.
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Interest Rate
The interest is the most significant cost attached to your loan. If the difference between your current mortgage rate and the available ones is substantial, a refinance can save you a lot of money in the long run.
Realize, however, that the interest rates advertised by lenders are usually the lowest borrowers can qualify for. If they are adjustable, they are subject to change multiple times and can become unpredictable down the road.
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Closing Costs
These fees are paid to the professionals who process a mortgage. Some of these costs are negotiable since a lender itself charges them. The others, though, are etched in stone because it is the government that collects them.
The closing costs should be taken into account to determine whether a refinance can genuinely save you money or not. If you do not consider them early on, you might pay more dollars to reset the clock of your mortgage.
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Break-Even Point
This pertains to the exact month when you expect to begin saving money on your new mortgage. Include both the closing costs and interest savings into the equation to know when exactly you can recoup your initial expenses when refinancing.
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Occupancy
Is your current property your forever home, or do you intend to move elsewhere in the foreseeable future? If you do not hold onto your house before you reach the break-even period, then refinancing is a complete waste of time, energy, and money.
It is not easy to predict your future situation, so applying for a refinance is a gamble to some extent. Ask yourself if the incentive of doing so exceeds its risk. If it does, then pursuing it may keep more dollars in your pocket.
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Your Own Credentials
Qualifying for a mortgage in the past does not guarantee that you will again when you refinance. Many borrowers get rejected for different reasons. Having a low credit score, borrowing too much money, listing your house, and earning less income are some of the ways to get denied.
A refinance is not an entitlement. A lender will say no to you if you do not hold acceptable credentials to be considered as a reliable borrower.
Apply for a refinance like the roof above your head depends on it because it does. If you do it carelessly and get approved, you might put yourself in a dire financial position and potentially lose your house.
