Mortgages are something that a lot of adults have, and yet, they still seem like this ambiguous and intimidating subject to tackle. That’s especially true for those of us who are millennials or younger…sometimes, it can feel like we’re going to be stuck renting forever. I’d liken it to purgatory, really, but it’s easy to forget that there are ways to make purchasing a home much more accessible than we realize.
Of course, the answer comes in the form of mortgages for the most part. Even though they are so omnipresent in our culture, that doesn’t mean that there’s much education about them. Most of us are stuck looking to the internet to get our information – in fact, that’s probably why you’re here.
Don’t worry, though – I’m here to fill in the blanks that a lot of public education has left behind. First, though, you may want to take a peek at resources like this one: https://www.experian.com/blogs/ask-experian/what-is-a-mortgage-and-how-does-it-work/. I find that they can provide some of the important “backstory,” so to speak, that you might be missing out on before you read this article.
Mortgages – What You Need to Know
Now, like I mentioned above, I’m pretty sure that most of us are at least somewhat familiar with mortgages. It’s pretty hard to avoid mention of them in pop culture at the very least – especially on TV. There are so many house hunting shows, be if for people looking for personal properties or ones to flip. Still, though, the discussions surrounding it are always vague and don’t have many details.
Why is that? Maybe it’s because talking about debt is considered rather taboo in most parts of the world – if I had to venture a guess, that’s what my money would be on. Besides that, though, those programs are definitely designed to glorify home ownership to the max and including too much about the “scary” parts doesn’t exactly work towards that goal.
Here, though, I would much prefer to tackle these very real and important issues to give you a more realistic view of home ownership. As uncomfortable as it may seem, for most of us, we’re going to have to take out a mortgage when we’re looking to purchase a property.
Now, when it’s for personal use, it’s considered a “residential” mortgage. Generally, these are a bit easier to refinance, which I’ll be covering more in depth in another section. For now, anyone who wants to refinansiering med sikkerhet can hang tight until we get there, or you can check out some of the resources I’ve provided thus far.
Residential ones are by far the more common type, although commercial ones for businesses do exist. However, since they’re not really all that important when it comes to refinancing, I won’t waste any more time on them. The main takeaway is that depending on what you’re using the loan for, it’ll be categorized differently (and the application/approval process will probably be different as well).
Applying: How it Works
Thankfully, this is pretty much the same as any other type of credit agreement – so, if you already know how loans work (at least somewhat), you’ve probably got an idea of what to expect. It’ll be a lot of questions about your credit history (yeah, that means they’ll want your credit score), your current income, and of course your personal documentation papers.
So, before you get started on the application process, you’ll probably want to have that info at the ready. It speeds everything up. Depending on the lender that you’re working with, you may just do an online form, or you may have to go in person to your local branch.
As far as how it works when you’re looking to do a refinancing mortgage, the application is going to be quite similar. However, one key difference is that you’ll have to include details on what your current mortgage looks like – the terms of it, what the interest rate is, etc. If you’re looking to refinance with your current lender, they may not need all of that, but it never hurts to be prepared.
Do Credit Scores Really Matter?
This is a question I get a lot, and I can certainly understand why. Unfortunately, I have to be the bearer of bad news here – yeah, credit scores absolutely do matter. They can make a huge difference in terms of what you get approved for. If you want an in-depth breakdown on how these numbers even work, you may want to check out this article.
Now, in terms of refinancing, the link between the two may not seem immediately apparent. Allow me to explain, though – when you’re trying to refinance a mortgage, what is your ultimate goal? That’s right – it’s to improve the terms that you originally agreed upon with your lender. Often, one of the key things that borrowers are looking to revise is the interest rate.
Do you know how you get a more favorable interest rate, though? For a long time, I didn’t realize that it was mostly linked to my credit score. Sure, external factors do play a part in it. The global economy inevitably can impact interest rates. However, there is a much stronger link between credit scores and the rates that borrowers are offered.
Basically, the higher your score, the lower your interest rate. This is because the higher score demonstrates to lenders that you are someone who can be trusted with loans – so, they don’t need to protect their own profits as much with the bigger charges.
What is Refinancing?
I know I’ve talked a lot about this so far, so it’s about time that I gave you a proper definition. Of course, you could look at a resource like this one, https://dfi.wa.gov/homeownership/refinancing, if you’d like to see what others have to say about it as well. In essence, though, the idea is that you are taking another look at your initial contract for your credit agreement and making some revisions.
What’s the purpose of doing this? For the most part, it’s all about getting yourself a more favorable deal. Whether that’s to decrease your monthly repayments to make that more manageable or to take advantage of your much-higher credit score to cash in on a lower interest rate, the process is going to be pretty much the same.
As a brief refresher, you’ll be going through the mortgage application process again, just as you did when you first made the credit agreement. This time, though, you’ll want to include details on what you are looking to achieve via refinancing. Make sure that you are specific as possibleso that your lender is in the loop.
Something you may want to make note of is that you don’t actually have to do this with the same financial institution that you opened the mortgage with. You can go to a different lender if you think that you can get a better offer from them. There are even places where you can compare the various rates and deals – the internet has a lot to offer.
Always be sure that you read over the new contract that’s being proposed, though. There are a few things that you’ll want to be prepared for – namely, the fact that often the length of your mortgage might be adjusted. This tends to happen more often if you’re altering the amount of your monthly repayments, so just be aware of it. A financial expert or advisor of some sort may be of use to help you to examine the terms – but even most economics blogs can offer some insights.
Should You do it, then?
The best advice that I can offer you here is to remind you that there is no easy answer when it comes to whether or not you should refinance your mortgage. It’s definitely something that you should consult with your partner about, at the very least, and take some time to consider. However, if you feel that your credit score is higher than it was before, or like you need to adjust your monthly payments, then it might be worth doing.
Again, though, the most important thing is that you don’t trap yourself into an even worse deal than the first one that you had. Be vigilant and read through all of the fine print, no matter how annoying that can be. Once you’re satisfied, though, go for it!