How Do I Know If Refinancing Makes Sense For Me?

Posted on November 3, 2009
Filed Under Unemployment Will Cause The Most Foreclosures In 2009! |

Home ownership is a major part of “the dream” that you worked hard to achieve. If you’re like most people than you probably assumed that the terms of your mortgage would stay the same throughout the duration of your mortgage.

Rates are at an all time low and it seems like you should go ahead and refinance. You should know everything all the things involved before you proceed.

The process of refinancing your home is very similar to getting the original mortgage. All that happens is your current loan is paid off with a new loan. So exactly how do you refinance your home? Let’s dive in.

What’s The Point of Refinancing?

You’ll get more favorable financial terms by refinancing so that’s the most common reason people go through a refinance. When more favorable rates are available you usually get a lower your monthly payment. if interest rates drop 1% or more below whatever your current interest rate is then most people would save money by refinancing. Refinancing your home for a better rate can be a piece of cake, even if rates haven’t changed, if you simply have improved your credit score.

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. It doesn’t make sense to pay high interest debts if you don’t have to so rolling them into the lowerer intest of your home will make for lower monthly payments.

The most important reason to get involved with refinancing your home is simple – saving money. 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. By using a home refinance to keep a solid credit score and low debt to income ratio, you will often qualify for lower interest rates on everything from credit cards to insurance. Solidifying your credit and lowering all of your bills at once is a strategic consideration for home refinancing.

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. With a professional mortgage broker, reviewing your options will save you time and headaches and it is usually free.

What Does It Take to Refinance?

Because a refinance is very similar to an original mortgage, you will need to complete many of the same steps. 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. Be prepared for similar requirements this time around.

What Do I Need To I Watch Out For Beforehand?

Your equity should be the first thing you want to consider. The lender will require some equity in the home for you to refinance. Refinancing your home may not be possible if you did not put 10% or more when you purchased your home or if haven’t had time to pay off any of your existing mortgage yet. However, if your home has appreciated in value even if you have not paid off any of the mortgage then you will probably have the equity required to refinance your home.

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. If your closing costs are higher than you would save by refinancing, then it will not make sense for you to refinance your home.

There’s only one way to know for sure how much you can lower your monthly bills by. 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. You should evaluate your options to save money because most brokers don’t charge anything to review this.

 

Comments

Leave a Reply