Are you willing to refinance your mortgage? If yes, then let me tell you it’s not as easy as putting your papers forward and getting it done. No, refinancing any loan impacts a lot of things. If you have a good credit score, you can easily get pre approved for a home loan. On the other hand, refinancing will impact your existing credit score differently.
So, let’s see how you should refinance your mortgage in a way that it saves you both time and money.
Consider the Benefits You’re Willing to Receive
First and foremost, if you’re willing to go through this paperwork, either of the following is your primary reason behind it:
- Save money on the total amount of interest you pay for the entire loan
- Get some cash in hand for the moment to carry out a big expenditure
- Obtain ownership of your property faster by paying off the loan earlier
When You’re Refinancing Matters
There are to things you need to consider – the market condition and the amount of time left for your loan repayment. If your duration of loan is about to end, there’s no point in getting it refinanced. Also, it is ideal for interest rates to be falling at that time.
Fix The Interest Rate
Ideally, refinancing will benefit you if you switch from fluctuation to fixed interest rate. This specially applies when rates are increasing the market and you lock your interest at a lower level. On the other hand, if you see the rates are dropping, wait for the appropriate time to lock the lowest possible rate.
Maintain Your Credit Score
Since the purpose of refinancing in most cases is to save money or get cash in hand at the moment, a lot of questioning does take place when you try doing so. This lowers your credit score. If you don’t maintain timely payments in future, your credit score goes down even further.
So, in order to ensure that you recover the downfall in your score within a year, you need to ensure the following:
- Make timely payments right after you apply for refinancing.
- Don’t use old credit cards or apply for too much credit.
- Ensure your accounts close on a good standing.
- Any missed out payments in the last 7 years are removed from your credit report.
Do a Market Research
Did you know you could refinance your mortgage from another lender too? And in that situation, why not look for someone better? You might get a better deal, given that interest is not the only cost of your mortgage and other fees can be lowered too.
Check Your Information and Documents
Refinancing is a long process that requires a lot of documentation. Ensure you have the following:
- The last 2 bank statements
- A credit report with correct and verified personal information
- Your last 2 W-2 forms
- Full tax-returns for self-employed
- Your last two payment receipts
Calculate Final Closing Costs
Refinancing involves closing costs as so much legal work is required. It needs to be 2-3% of your total loan amount and not more than that. This 2-3% will include the following:
- Attorney fees
- Application cost
- Discount points
- Cost of title insurance & search
- Inspection fees
- Cost of appraisal
To Sum it Up
Given the factors you need to take care of to refinance your mortgage, it is easier to get pre approved for home loan. Refinancing does have many benefits, but requires a lot more work from your end too.
Contact us today and solve your refinance mortgage issue!