Looking To Refinance Your Home?

Home ownership is a major part of “the dream” that you worked hard to achieve. When you bought your home, if you’re like most people, then you probably assumed that the terms and payments of your mortgage would be the same for the duration of the loan.

Rates are at an all time low and it seems like you should go ahead and refinance. Before you go ahead dive in, you ought to know what is involved in refinancing your home.

The process of refinancing your home is very similar to getting the original mortgage. In short, all you are doing is paying off your current loan with a new loan. So exactly what is involved in refinancing your home? Let’s dive in.

Why Should I Refinance?

The most common reason for refinancing your home is simply to get better terms. Often you can get a lower monthly payment simply by capitalizing when rates are favourable. Most people consider refinancing if interest rates drop 1% or more below whatever your interest rate is. However, if your credit has improved, refinancing your home for a better rate may be easy without a significant change in rates.

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. Rolling high interest debts into your home can make perfect sense and will typically lower your monthly payments.

The most important reason to get involved with refinancing your home is simple – saving money. If your debt to income ratio is getting very high then refinancing your home may actually improve your credit score. It will also help you free up additional income by lowering the minimum monthly payment on your most common 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. Thus getting involved with refinancing your home can be a powerful strategic move toward lowering all of your bills at one time and solidifying your credit.

When refinancing your home, often if you are involved with a good mortgage broker, they may be able to find you the best possible lending solution compared with shopping for one yourself. In fact, finding out if you should refinance your home with a good mortgage broker will not cost you anything to review your options and it will save you a lot of time and headaches.

What Is Involved In Refinancing Your Home?

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. This time around, be prepared for the same types of requirements.

What Should I Look Out For First?

The first thing you want to look out for is equity. The lender will require some equity in the home for you to refinance. If you have not paid down some of your existing mortgage or if you did not put down 10% or more when qualifying for your original mortgage, refinancing your home may not be possible. 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. Just like with your original mortgage, there are closing costs associated with obtaining a 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.

If you’re serious about using a home refinance to lower your monthly bills, there’s only one way to know for sure to know what you will save. 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.