With mortgage interest rates at an all-time low, many homeowners are considering re-financing their loans. Depending on several variables, this could be a very wise move to lower your monthly payments and even shorten the length of your current mortgage. But before jumping into the process, let’s investigate several questions to ask yourself.
- How is your credit score? Has anything changed that may affect your good rating? These days a credit score of 760 and above get you the best rates.
- How much equity do you have in your home? Lenders want to see around 20 percent equity for refinancing, but even if your equity is lower, there are refinancing options available through the government’s Making Home Affordable program.
- How long are you staying put? If you plan to move within the next two years, refinancing is not a good option. The fees associated with refinancing could eat up any interest savings you may have gained.
- How much does it cost to refinance? Just like buying a home, there are fees associated with refinancing. Do the math. Are lender fees, closing fees, title search costs, inspection fees and credit search fees worth it financially for you to refinance?
- How much will you save? Talk to your lender first. They will help you compare refinance expenses with different lengths of loans and calculate when you’ll begin saving.
Researching the answers to these questions will give you a good assessment about refinancing your home. When you believe it’s worth pursuing, go prepared. Lenders want to consider your whole financial picture. Gather your recent checking, savings and investment statements, tax returns, W2 forms and pay stubs. The more information you have, the quicker you could be on your way to lower monthly payments and major savings.