Getting a loan is not a one-time liability, you have to meet up the due date during the term of the loan. And the biggest factor which decides the burden is the interest rate as it will decide your monthly payout. That is why some people choose to refinance their current loan into one with a more favorable term. As an example, a 30-year fixed refinance rate has a stable interest and monthly payment throughout its 30-year term as compared to others with an adjustable rate which may increase or decrease making it difficult to set a specific budget. To know why opting to choose a fixed mortgage refinance rate is a good idea, continue reading.
Let’s see why choosing a fixed rate is beneficial
If you currently have a mortgage with a high-interest rate or an adjustable rate that fluctuates over time, then going with a 30-year fixed refinance rate is better because it offers rate stability and fixed monthly payments making it easier to set up your budget. The best thing about this rate type is that you will know the total amount you will need to pay at the beginning of your loan process. Whereas, with the other type of rate, your liability can increase at any time.
To make things easier, you can consult with experts that can help you in selecting the most suitable rate for your needs and situation. It is also important to compare lenders, estimate the possible increase in rates and calculate interest for the period accordingly.
Can anyone get a fixed rate of interest?
Not everyone can get a fixed rate of interest but if you have certain qualifications, then surely you are eligible for this type of rate. Lenders sometimes also assess the clients and pre-approve some amount, which is the best case if you need funds. Well, this happens only when you have a good credit score.
What do you need to pre-qualify?
To get the benefits of a fixed mortgage refinance rate, you must fulfill certain conditions. These conditions may differ from lender to lender but the basic ones remain the same. The first requirement is to have a good credit score and this is very necessary because the credit score reflects your creditworthiness. You can enhance this by paying your debts on time.
Next is your income source. Every lender may have different policies and some might prefer self-employed borrowers and others might prefer salaried employees. But the thumb rule is that the more monthly income you have, the better your chances of getting approved. Your disposable income will help in getting a comfortable fixed rate of interest. Asset value is another document that may help, but this is more of a security amount rather than an eligibility document. Some lenders may not offer a fixed rate on the basis of security value, but it will surely help in negotiating the rate with the lender.
To know the suitable type of rate for your loan, the loan tenure matters. If you are borrowing for a longer term and expect the general market trend to increase rates, then a fixed rate is better. Whatever loan you choose, always consider your situation and your ability to pay so you won’t encounter difficulties along the way.