by Maurie Backman | Sept. 8, 2020
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Closed on your mortgage refinance? Do these things immediately.
There are plenty of good reasons to refinance a mortgage today. Mortgage rates are so unbelievably low that swapping your existing home loan for a new one could save you a lot of money each month. Or, it could help you pay off your home a lot quicker and slash the total amount of interest you pay on your loan.
If you've recently refinanced, you can now sit back and look forward to reaping these benefits. But you'll also need to make these important moves.
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When you refinance a mortgage with a new lender, your old lender doesn't necessarily get notified right away. As such, if you pay your mortgage automatically each month, you'll need to cancel that arrangement. That way your old lender won't continue to collect a payment you're not liable for.
Of course, if you don't have your mortgage set to auto-pay, you can just stop writing out those checks to your old lender -- it's pretty simple. But many people have the process set up automatically as they worry about forgetting their payments. If you're one of them, you'll want to cancel as soon as possible.
It's easy to forget to pay your mortgage, or any other bill for that matter, when you wind up with a new payment schedule or your mind's simply occupied with other things. That's why setting up an automatic payment with your new lender is a good idea. But you may not be able to do so the day you close on your mortgage.
It could take a few days to get your account or loan number, so be prepared to sit tight and wait for a payment letter with instructions from your new lender. That said, if it's been a week or more since you closed on your refinance and that letter hasn't arrived, you should definitely reach out to your new lender to get the payment information you need.
Maybe your monthly mortgage payment has gone down now that you've refinanced. Or maybe it's gone up because you opted for a shorter-term loan (say, you swapped a 30-year mortgage for a 15-year loan). Either way, now that you've refinanced, the monthly check you cut your lender is going to be different, so take that into account and see if you need to rework your budget in light of it.
If your monthly payment goes up by a few hundred dollars a month, for example, then you may need to cut back on other bills to compensate. And if your payment is going down, think about how that might help you reach your various financial goals. You may decide to ramp up your IRA or 401(k) contribution rate, pay down a credit card balance more quickly, or do other things with that newly freed-up cash.
Refinancing a mortgage makes lots of sense these days. If you're going to do it, shop around with different lenders to get the best offer. And then prepare to make the above moves once you close on that loan.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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