If you want to bring down your interest rate or consolidate your debts, refinancing your home in Bloomington, Minnesota can be a great option. Be careful, however, as taking out the wrong mortgage can have serious financial implications. Here are five important questions you should ask your mortgage broker in Bloomington, Minnesota when refinancing to avoid any issues down the road:
Is this an adjustable or fixed-rate mortgage?
Adjustable-rate mortgages have a low initial rate of interest that can go up during the loan term. Fixed-rate loans, on the other hand, have the same rate of interest locked in. When taking out an adjustable mortgage, it is crucial to understand what increases are possible and when they might occur. You do not want to be caught off guard by a rate increase that happens too quickly, leaving you unable to make your monthly mortgage payments.
What can I expect in terms of closing costs?
Closing costs can be in the 1000’s, which is why it is important to know what they are ahead of time. You should also determine whether you will be required to pay these fees at closing or whether they will be rolled into the amount you are refinancing. Rolling the closing costs into your mortgage may increase your monthly payments as well as the amount of interest you will pay over the life of the loan. However, if you do not have the cash to cover the closing costs upfront, it may be something you will need to consider.
What is the length of my mortgage?
Do not assume your mortgage has a standard 30-year term. These days, mortgage lenders in Bloomington, Minnesota are writing mortgages for as long as 40 years to make monthly payments more affordable. The problem with this is that the longer your term, the more you will pay in interest over the life of your mortgage. Insist on a 30-year loan—or, if possible, a 15 or 20-year mortgage, which may also come with a lower interest rate to boot.
Is PMI required?
Private Mortgage Insurance, also known as PMI, is a type of insurance added to your mortgage if your loan-to-value ratio is below 80%. It is worth noting that just because you are not paying PMI right now does not mean you will not have to when you refinance. If the value of your Bloomington, Minnesota home has dropped or you are receiving cashback, you could be borrowing more than 80% of your home’s value without even realizing it.
Is there a prepayment penalty?
This is arguably the most important question you should ask your mortgage broker in Bloomington, Minnesota. After all, your goal should always be to pay off the mortgage before the end of its term. Most mortgages come with no prepayment penalty by default, but you should always ask to be sure.
While it is important to know the answers to these five questions, there are still several other things you should know about your mortgage. Take time to review the terms carefully, and make sure you ask questions if there is anything you do not understand. You do not want to sign before you understand all the details of your mortgage.
Are You Looking for a Mortgage Broker in Bloomington, Minnesota?
Are you looking for an experienced and licensed mortgage broker in Bloomington, Minnesota? You can count on Compass Mortgage. Call us at (833) 638-7836 or contact us online to learn more about how we can help you make the best choices regarding your mortgage financing or refinancing.