Refinancing your home can be a terrific way to decrease the interest rates that you have on your current mortgage. It is also an effective way to get some extra cash in your pocket to do some home repairs and additions. Refinancing for the current value of the home will increase the amount that you need to pay back to the lender, again, but sometimes it is the only way to build up some funds.
Whatever your reasons are for wanting to refinance there are some steps that you should take when doing so. Before following them, though, you need to make sure that refinancing your home is the best move for you during your current situations. Let us go over them really quick.
- Define Your Goals: You need to take the time to figure out exactly why you want to refinance. Are you wanting to decrease the interest rates, or perhaps lessen the time that you must make payments. Maybe you want to get some extra funds to build a new deck, or a second bathroom. Decide why you want to refinance so you have a clear goal in mind when you talk to your lender.
- What Type Of Refinance You Need: There are a couple different types of refinancing options that will be available to you. It all depends on what you need to achieve the goal that you defined in step one. You can go for one that is designed to help with your rates and term, or a cash-out (full or partial), or one designed to streamline your current one. Each will have advantages, so it all depends on why you need it.
- Gather Documents: You have been through this process before so you should already know what documents you will need to show proof of your information. This step is becoming less important because the lenders can pull a ton of information from their data bases, but have them all ready in case iSelect asks for them.
- Equity Amounts: You will need to do a little bit of math, now. You need to find out if you have enough equity built up to refinance. Equity, in case you have forgotten, is the current difference between how much your house is valued at and how much you have left to pay on the loan. If you still owe more than the house is worth you may not want to refinance at this time.
- Spruce Up Your House: You need to go through the house and make sure that everything is in good working order, and that there is no damage. Check the electrical systems, the plumbing, the exterior, and all the outbuildings. If you need to slap a fresh coat of paint on the walls, do it before the inspection.
- Compare Lenders: You will want to compare a few lenders to ensure that you get the best refinance loan that you can, at the best rates. The easiest way to do this is to use an online comparison site, like the one linked to above.
- Check Your Numbers: You need to go to a credit bureau platform online and check to make sure that all your numbers are where they need to be. Your credit score is the first thing that they will look at, as well as your loan-to-value ratios and your debt-to-income numbers.
- Breakeven Point Calculations: You will now need to figure out what your breakeven point is, which is the amount of time that it will take you to pay off the refinance costs. Basically, you will take the amount of charges that it cost you to refinance and divide it by the amount of your payment. If it will take you five years to pay it off, but your planning to sell in two years, the refinance loan would not make sense to do.
- Closing Disclosure: You need to read this disclosure thoroughly, from front to back. If there is anything that you do not understand ask questions. Never commit to anything that you do not fully understand.
- Financial Changes: You will want to hold off any making any financial changes until the closing of the refinance loan is complete. So, put that vacation on the back burner for now.
That is all that there is to it. Refinancing on your house may seem like a long, drawn-out task, but in the end, it will be worth it. It will be a good task to complete if you followed the tips above. If you have not, and you choose to rush into it without being prepared or educated, it will come around full circle and bite you in the rear.
While this is not exactly a tip that will help you find good grades, it definitely is the most essential thing that you have to factor in when looking for a loan. Any kind of lender (even reverse mortgage providers), will always check the status of your credit score. The higher your credit score, the bigger the chances that the financial institution will provide you with a lower rate. Your score basically shows that you are a reliable person that will pay back what you owe in the given time window.