Whether you are looking into refinancing your car or mortgage knowledge is vital. In either case you will have to take a deep look at a few things. Refinancing requirements, rates, credit score, and debt ratio are just a few examples of knowledge you must first obtain. Before you decide on refinancing your car or mortgage think about the following considerations.
Refinancing and Me
The decision to refinance should always be based on your financial situation. When looking to refinance a car, the primary reason is almost always to lower your monthly payments. While, when it comes to mortgage refinancing many people make the mistake of letting the rates guide their decisions. This should never be the case when refinancing. You must not allow mortgage rates to sway your decision, ever. Think only personal finances and what refinance means for you.
The following points listed are ones that should be taken into serious consideration when looking into refinancing. They are not specific to a car or mortgage refinance. The points made will reflect the overall idea of refinancing in general. Refinancing can be a great help when you find yourself in need of doing some restructuring of your personal finances. So, knowing what you’re getting into is an important factor for making your final decision on whether refinancing is for you.
While dealing with an auto refinancing loan is much easier then refinancing a mortgage. It’s important to fully understand the banks requirements for refinancing. Shopping around for the right lender might be good for refinancing a car. Since some banks are able to offer more competitive rates when it comes to car refinancing. But the same can’t be said for mortgage refinancing where it may serve you better to stay with your current lender. They will often help with closing costs by reducing them or getting rid of them all together. In both cases it is always important to fully understand all the fine print.
OK, so the question here is do you want to pay less money or less interest? The interest rate when refinancing a car will solely depend on the information given to the lender. They then will give you a rate which they can offer you and you would either take it or leave it. This rate can change however over time. Meaning what you were quoted at today may be different in a month or two. Also remember different banks can sometimes offer you different rates so definitely shop around.
When dealing with a mortgage the key is to know whether you want to pay less money or less interest. When you desire to pay less money looking for at long term loan with a low interest rate is ideal. While if a better interest rate is what you seek look for a low rate on a short term loan. However, do be mindful of the amount of your payments to ensure you can afford them.
It’s not only important to know your credit history when looking into refinancing but if it can take a hit. With any form of refinancing lenders will always require a credit check. They perform what’s called a hard inquiry which will certainly drop your score a bit. You may also notice another small drop when and if you qualify and accept a refinance loan. Keep in mind paying your loan on time after you refinance will help get that score back up in no time. Another good thing to know about your credit score when refinancing; more then one hard inquiry in a short time period will only count as one.
Debt Vs Income
Lenders typically look to keep your payments to a specific percent of your monthly gross income. They want to make sure you will always be able to pay your bill. With thirty to forty percent being the acceptable range expected for your debt to income ratio. Try calculating these numbers yourself before attempting to refinance. If you don’t meet the lenders requirements you may need to look into some debt consolidation before moving forward.
Banks Encourage Refinancing
Banks want you to refinance with them. Knowing this small fact is crucial in knowing the power you hold over refinancing. Banks want to keep their customers happy and put. They don’t want to lose your business just as bad as the next bank wants to get it. So, looking at a number of lenders and what they have to offer is key in getting the best deal possible.
As long as you do all the homework necessary on your end and are fully prepared to get the refinancing process started. Lenders are capable of offering very competitive rates. This is also why adequate research and calculations of your current situation are vital. Banks are always competing for business so even if it’s not the right time for you to refinance they may proceed as so. This can possibly lead into you opting for a refinance loan that ends up putting you in a deeper financial whole.
Keep in Mind
Refinancing a car or mortgage although a common practice can be extremely confusing. You must do your homework on lenders as well as your own current financial situation before making a decision. Rushing in unprepared will make the process a lot more complicated then it already is. Refinancing a car may not be as difficult or drawn out as a mortgage but it isn’t simple either. You need to be able to understand when refinancing is best for you and what options are available to you.
Similar to car refinancing, mortgage refinancing lenders may differ in more ways then one. It’s important you learn all the requirements of every lender you deal with. Without doing so you risk making a poor decision that can hurt you in the near future. Only you can make the best decision on whether refinancing is right for you and that involves careful examination of your financial situation first.