You probably worked very hard on “the dream” and a big part of that was home ownership. When you bought your home, if you’re like most people, then you probably assumed that the terms and payments of your mortgage would be the same for the duration of the loan.
You should probably refinance when rates are at all time lows like they are now. You ought to know everything that is involved in refinancing your home before you jump in head first.
Getting your first mortgage and refinancing are almost the same thing. In short, all you are doing is paying off your current loan with a new loan. So exactly how do you refinance your home? Let’s dive in.
What’s The Point of Refinancing?
The most common reason for refinancing your home is simply to get better terms. When more favorable rates are available you usually get a lower your monthly payment. Most people consider refinancing if interest rates drop 1% or more below whatever your interest rate is. However, if your credit has improved, refinancing your home for a better rate may be easy without a significant change in rates.
Refinancing your home can also make sense if you are faced with a large one time expense like college or university tuition, a funeral, a large unexpected bill or anything out of the ordinary. Rolling high interest debts into your home can make perfect sense and will typically lower your monthly payments.
In most scenarios, you’ll save money by refinancing your home. You will actually immediately improve your credit score if you have a high debt ratio by refinancing. Additional income can be freed up by simply lowering the minimum monthly payment on most of your bills. You will often qualify for lower interest rates on additional things like credit cards and insurance by using a home refinance to improve your credit score and to maintain a low debt to income ratio. Refinancing can be a strategic move toward simultaneously solidifying your credit and lowering all of your bills at once.
Shopping for a refinance can take a lot of work and can lower your credit score simply for the credit inquiry. A good mortgage broker will usually find you the best possible lending solution without the hassles. In fact, finding out if you should refinance your home with a good mortgage broker will not cost you anything to review your options and it will save you a lot of time and headaches.
What Is Involved In Refinancing Your Home?
You will need to complete basically the same steps because refinancing is so similar to the obtaining your original mortgage. When you first obtained a mortgage you needed to fill out an application, verify your income, obtain a credit check, verify the status of the existing mortgage, verify the property title and get an appraisal (depending on the loan to value this may just be a drive by appraisal) among other things. You’re going to have roughly the same requirements so this time around be prepared for that.
Before I Get Started, What Should I Look Out For?
You first consideration should be your equity. To refinance, your lender will need some equity in the home to be present. Understand that refinancing your home may not be possible if you have no paid down some of your existing mortgage. However, you may have the required equity if your home has appreciated in value even if you have not paid down anything on your mortgage.
Although, the most important thing you should consider is the expenses going in. Your original mortgage had closing costs and there are also closing costs for getting a new loan. It will not make sense to refinance if your closing costs are higher than you would actually save.
If you’re serious about using a home refinance to lower your monthly bills, there’s only one way to know for sure to know what you will save. Using the services of a qualified professional mortgage broker who knows the best way to help you achieve your goals will save you a lot of time, money and headaches. It’s free for you to find out what your options with most brokers so if it makes sense for you to save money, you should evaluate your options.