When you want to refinance a loan, you can save a lot of money when you get the right deal. You should not forget the fact that refinancing can harm your credit history, waste your time as well as put your home at the risk of foreclose. That is why you have to be very careful when you are considering refinancing. Fortunately, there are some questions to ask when refinancing a loan that will help you make the right choice. The questions to ask include;
1. What will my monthly payments be and what are the interest rates?
It is very important to know how much money you would be required to pay per month. The amount that you are required to pay should not be more than the amount that you know you can afford to pay every month. Will there be changes of payment plans in future? Is there an initial fixed payment period? These are the questions that you must ask when you want to know exactly how much you are going to pay every month. Ask your lender to calculate for you the amount that you would be required to pay in a worst case scenario.
You should also ask whether the interest rates will remain the same during the life of the loan or whether the rates will be adjusted from time to time. If the rates will be adjusted, how will the adjustments be done?
2. Will the rate of interest change before the request for refinance goes through?
The rates of interest change from day to day. Although the daily changes are usually small, the rate can change significantly over the period when your loan is being processed. That is why it’s so important to ask about how the loan interest rates may change to avoid surprises.
3. Will it be cheaper to refinance with the current lender?
Most of the time, sticking with the current lender when you need refinancing is cheaper. This is because when you stick to your current lender, there will be no expenses like property appraisals, title search etc. Sometimes, it may be better to go to a different lender. You should take time to compare the different options available to you so that you can determine the one that will be the best for you.
4. How much will the loan cost upfront?
The fees that the lenders charge can run into thousands. You might also be charged a significant amount of money by the third parties involved in the process. Before signing up for a given loan, make sure that you have a list of all closing charges. Feel free to ask the lender if any of the charges are negotiable.
5. What is the term of the loan?
Find out how long it would take for you to complete the payment of your loan. Ask whether you have to pay a fee if you manage to pay off the loan early. This is because there are some lenders who charge a penalty to borrowers who pay off a loan early.