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4 Tips to Help Homeowners Refinance Their Mortgages

March 8, 2017

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During her recent testimony before the U.S. Senate Banking Committee, Federal Reserve Board Chair Janet Yellen hinted multiple interest rate increases might occurin 2017, CNN Money reported.

Homeowners should entertain the idea of refinancing their current mortgages to take advantage of historically low interest rates. Here are four helpful refinancing tips:

1. Prepare to act quickly

While Yellen didn’t say exactly when rates would go up, a March hike remains possible, in addition to two further hikes in 2017. If that’s the case, homeowners should prepare now before the Fed raises rates.

Homeowners can prepare by researching potential target rates and filling out a refinancing application.

2. Boost (or maintain) the credit score

Homeowners need to ensure their credit scores are strong enough to qualify for low rates. If refinancing is in the cards this year, owners should pay bills on time, avoid a high credit utilization ratio and fix any credit report errors. 

3. Consider a short-term refinance

According to NerdWallet, a short-term refinance may help homeowners save money because rates for 15-year mortgages are lower than 30-year fixed loans. Monthly payments will be higher, but homeowners will save money by paying less interest.

4. Look into a cash out refinance

Since home values are also rising, homeowners may be interested in a cash out refinance. Bankrate explained this financial move is when homeowners refinance for more than the amount currently owed on the house. They secure a new mortgage with a lower rate and walk away with extra money.

A cash out refinance is risky, though. Homeowners should only invest that extra money in things that build equity, such as home repairs.

If homeowners want to save money, they need to seriously entertain the idea of refinancing.

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