What to Know Before Refinancing
Now is the perfect time to refinance! With mortgage rates on the rise, the time to act is now.
When you refinance, you’ll replace your current mortgage with a new one. Keep in mind, the process to obtain this loan is the same as any other loan, meaning you will need to supply the proper financial documents in order to proceed.
Deciding if and when to refinance can be a confusing process, but it doesn’t have to be. Start by asking yourself these three questions. As you’ll come to find out, refinancing may help you achieve some financial goals. Some common benefits include the ability to:
- Lowering your monthly payments by taking advantage of lower interest rates
- Shortening the term of your loan to pay off your mortgage faster
- Taking equity out of your home for expenses (i.e. home improvements or debt consolidation)
- Replacing an adjustable rate mortgage with a fixed rate mortgage
- Getting rid of private mortgage insurance (PMI)
When refinancing a mortgage, there are several things you can do to save money – for example, a lower interest rate oftentimes equals a lower monthly mortgage payment, and combining a lower interest rate with a shorter term will maximize savings over the life of your loan. Check out our previous blog post for more great refinancing tips.
Things to Consider When Refinancing
Does a Refinance Make Sense?
Making the decision to refinance ultimately comes down to whether it will save you money or not. For example, are the monthly savings from a lower rate sufficient to cover the cost of refinancing, or do the interest savings from shortening the term of your mortgage justify a modest increase in monthly payment?
How Is Your Credit Score?
Your credit score is the biggest factor in determining the interest rate of your refinanced loan. Before you apply, make sure your finances are in order and your credit score is where it needs to be to get the loan you want at the interest rate you want. Also, since this is just like getting a new mortgage, you’ll need to provide the usual documentation to your lender – pay stubs, tax returns, bank statements, etc.
What Is the Actual Value of Your Home?
Real estate websites like Zillow and Redfin are helpful in many ways, but they don’t always give the most precise numbers. If you’re thinking about taking cash out of your home’s equity, it’s important to check official records or get an expert appraisal of your property’s value. Failure to do so may lead you to think your property is worth more than it is, resulting in a lower loan amount than you might have been expecting.
Have You Heard of the HARP Program?
The Home Affordable Refinance Program (HARP) Program is a great refinance option for people whose homes have not fully recovered in value, and is currently worth less than what they paid for. The program enables borrowers with little or no equity and/or a low credit score to refinance into a more affordable mortgage without new or additional mortgage insurance.
The best way to determine if refinancing is the right move for you is to contact a Ross Mortgage loan officer and request a mortgage check-up. By taking a look at your current mortgage loan, and asking you a few simple questions about your financial goals, we will be able to help you determine the right route to take.
If you’re looking to refinance your home, send us a message or give us a call at (800) 521-5362 to speak with a Ross Mortgage lending expert.