Over the life of a typical mortgage, home owners will likely have one or more opportunities to refinance. There are a lot of great benefits to refinancing a mortgage. These benefits include saving money by lowering your interest rate, lowering your monthly payments and making your mortgage more manageable and stabilizing your monthly payment by switching to a fixed-rate mortgage.
With so many awesome financial benefits, it's a shame that so many avoid refinancing a mortgage just because the process is complex and takes a bit of time. There are a lot of steps to refinancing your home mortgage, so it's easy to get overwhelmed if you've never done it before. But, if you break it down into smaller steps, you'll see that it's a pretty simple process.
So, if you are thinking about refinancing your home mortgage to take advantage of low interest rates, here are 7 tips to help you get started.
1. Know Why You're Refinancing.
What's your reasoning behind your refinance? Are you refinancing so you can get a lower interest rate, to lower your monthly payment or to lock in on a fixed interest rate? Before you start refinancing you need to know why you're going through the process - it will impact the type of mortgage you end up needing.
2. Set Your Limits.
Once you've figured out the type of loan you need, you need to set parameters. What interest rate would you like, about where do you want your monthly payment to be? Decide on your mortgage terms and whether you want a fixed-rate or an adjustable-rate mortgage. Use a refinance calculator to help you identify and define your limits.
3. Know Your Credit Score.
The better your credit score, the better terms you'll be able to get on your loan. Before you start refinancing, find out what your credit looks like. If you've got a low credit score, you may have a difficult time qualifying for the loan.
4. Know the Market.
It's a buyer's market out there today. Property values are dropping, which makes it easy to get into a great house for a low price. If property values are really low in your area, you may have a hard time refinancing. You'll need your home to appraise for at least the amount of the loan. If you have a new loan and haven't paid it off very much, you may have a hard time qualifying.
5. Know Your Mortgage Payment Penalties.
Some home mortgage lenders will charge fees if you pay off your home loan before a certain date. Make sure you take a look at the terms of your loan to avoid any such fees. If your company charges a fee, make sure you know what it is so that you can make an informed decision to refinance and pay the pay-off penalty. Sometimes the lender will waive the fee if they handle the refinance, so that's another thing to look into.
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