Loan Interest Rate has Reached a New Low: Time to Consider Refinance(1)

January. 08,2021
Loan Interest Rate has Reached a New Low: Time to Consider Refinance(1)

my bought its first mansion for $ 1 million the year before, a down payment of $ 100,000, and the rest have been asked for a mortgage for 30 years. But because Amy's credit was so bad, the bank paid back 6.5% interest. This year, Amy's credit has improved considerably. If you are Amy, are you going to continue to pay off the mortgage at 6.5%, or are you going to ask for a "refinance" to lower the interest rate and pay off the mortgage for 30 years ?

It seems that more and more people are buying a house this year. If you don't know how to apply for a loan or refinance, wouldn't it be a loss? The mortgage interest rate is so high, do you want to lower the interest rate a bit and catch your breath? What exactly is refinancing? Is your situation suitable for refinancing? Don't worry, after reading this guide to refinancing, you can become a financial expert without being a CPA!


What is refinancing?

Refinance means "take out a new loan to repay the existing loan". New loans may have lower interest rates, which can not only help you improve your financial situation, but also improve your lending capacity. The process is usually as follows:

1. You want to reduce interest and improve existing loans

2. Find a good lender (bank) and apply for a new loan

3. Pay off existing debts with new loans

4. Pay the new loan on time until you pay off the loan

How can I apply for refinancing? Which refinancing company is the best?

Applying for refinancing is like buying food from a vegetable market, so you have to shop around. First, understand your credit assessment first. Even if your credit score is high, other houses may have better preferential prices and better interest for you. You can ask the lender to quote you a price before applying, and then look for better deals everywhere. But remember to not apply for loan refinancing from different companies at the same time, as this will not only lower your credit rating, but will also increase the interest rate on your future loan.

If it is a home loan refinance, you can use Quicken Loans financial calculator to estimate your monthly repayment costs and interest; If you plan to refinance, use the following tools to select the recommendation of the refinancing company in your state of residence.


What are the benefits of refinancing?

Save money: the reason for refinancing is to save interest. Usually, refinancing can lower the existing interest rate, especially for long term or large loans, which can save a lot of money due to the lower interest rate. For example: your current mortgage interest is 7%, after refinancing, you may be able to get lower mortgage interest, such as 4% or 5%, you can use the lower interest to pay off the mortgage.

Reduce the payment: refinancing can help you reduce the monthly payment, and when you apply for refinancing, you can restart the "loan clock" to extend the time you need to repay the loan to reduce your monthly payment. For example: your interest on your mortgage is now 7% and you have to repay it for 30 years. If you decide to apply for refinancing in the 10th year, you can not only benefit from a lower interest rate, but you can start your mortgage over for 30 years.

Shorten the loan period: If you do not want to extend the payment period, you can also use Refinance to shorten your loan period. For example: converting the refinancing of a 30-year mortgage to a 15-year mortgage and using lower interest to pay off the loan.