Sep 24, 2020
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Today's mortgage rates are still among the lowest ever seen, with some lenders offering 30-year fixed-rate refinance lows at 2.50% or lower.
If you’re a homeowner with an existing mortgage, you might want to consider refinancing — even if your current loan is less than a year old. At the start of 2020, 30-year rates were averaging 3.72%, compared to just 2.90% now, according to mortgage giant Freddie Mac.
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Refinancing at today’s record-low rates could save you a few thousand dollars a year in interest, and tens of thousands of dollars over the course of your loan.
If you think refinancing might be right for you, here are four steps to make it a success.
1. Be certain a refi is the right move
Before you commit to a refinance, there are a few important things you need to consider. Today’s basement-dwelling rates may look good on paper, but depending on the terms of your existing mortgage, you might be subject to loan conditions that could make refinancing a bad call.
Some mortgages carry a penalty for early repayment, especially during the first few years of the loan. Before you start looking at refis, read your loan documents carefully to make sure you won’t get dinged with exorbitant fees.
You also need to make sure a refinance now won’t end up costing you more in the long run. If your current mortgage is for 30 years and you’ve already paid off half of it, refinancing into a new 30-year mortgage could cost you tens, or possibly hundreds of thousands of dollars in additional interest.
Finally, consider that mortgages come with thousands of dollars in closing costs. Be certain you'll stay in the house more than long enough to pay off those fees with the savings from your new loan.
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2. Talk with a pro
The best way to ensure that refinancing is the right decision is by consulting with a professional. Today, you can turn to an online financial planning service that will give you top-of-the-line financial advice without the high fees.
You'll work with a certified financial planner who will not only counsel you about your refi, but also help you create a retirement savings plan tailored to work with your mortgage.
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That way, once your home loan is fully paid off you can rest easy knowing you’ve essentially got a chunk of change stashed away for your golden years.
A simple 30-minute call can get you thinking about your financial goals and priorities — and how a refinance can help you achieve them.
3. Compare rates to find the right loan
With mortgage rates so low, you might be tempted to jump at the first refinance offer that comes along. But shopping around and comparing rates can save you even more on your new monthly payment.
You might always do it the old-fashioned way, by researching local lenders and contacting them individually about their rates — but that could eat up a lot of time.
A better option is to go online, gather quotes from at least three lenders, and compare them.
Typically, you answer just a few questions to be connected instantly with lenders in your state or area that can meet your needs.
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You can easily do a side-by-side comparison of lenders’ interest rates, loan terms and monthly payments, and you can check user reviews for each bank, credit union or loan company to help inform your decision.
Checking mortgage rates will never hurt your credit score. If you’re planning to refinance, you owe it to yourself to shop around and find the best rate available.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
4. Protect your investment for your family
It isn’t pleasant to think about, but the possibility that something unexpected might happen to you is important to consider as a homeowner.
Once you’ve refinanced, you'll want to feel confident your family won’t have to worry about how they’d make the mortgage payments if they were to lose you.
The best way to ensure your family would be financially secure after you’re gone is by taking out a life insurance policy. And while the idea of shopping for life insurance might seem a bit uncomfortable, using an online comparison site can make the process painless.
In just minutes, you can find you the three best rates for your specific needs. Depending on how old you are and where you live, you could find a policy that offers your loved ones $1 million in financial protection for less than $7 a week.
Though you can’t put a price on peace of mind, you’ll know you’re getting the best coverage available.
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Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.
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