As a homeowner, there will more than likely come a time when you will feel like it is a good idea to refinance your home. However, it’s important to keep in mind that refinancing a home isn’t a decision that should be taken lightly.
There are costs involved with refinancing a home, and it’s important to consider your long-term plans for the house before you embark on the refinancing process.
Determining the best time to refinance your home mortgage can take some time and effort, but if you educate yourself on market trends, your research might help you save a lot of money on your mortgage. We’ve put together some things to consider:
Determine why you want to refinance
Do you currently have a variable interest rate, and you’d prefer a fixed interest rate? Do you want to switch from a 30-year mortgage to one that is shorter? Or do you want to refinance so you can take out equity to pay off debts? Understanding your end goal is important to determine if it makes financial sense. Remember – refinancing doesn’t eliminate debts – it simply restructures them.
Educate yourself about the different types of mortgage loans that are available. Different loans are used for different purposes, such as repaying your mortgage faster, flexibility, etc.
Seek out a mortgage lender
Find a reliable mortgage lender who you trust and has your best interest at heart. Your lender should spend time with you discussing your long-term plans and determining the best financing options based on those plans. For example, one of the things to think about is how long you will be staying in the property.
Check your credit
Seek out your credit report from the three main credit reporting agencies and check it for accuracy. If you find inaccuracies, immediately begin the process to correct them. Your credit report impacts your credit score, which in turn will influence your refinancing.
Stop applying for credit
If you plan on refinancing your home don’t open new credit cards or department store cards. New lines of credit can drive down your credit score and negatively impact your interest rates.
Crunch the numbers
Determine if refinancing is really going to benefit you. If you’re switching from a variable rate loan to a fixed loan, estimate how much you will likely save. Do the same thing if you’re opting for a shorter-term loan. Talk to your lender, discuss your options and calculate whether the numbers will result in an honest benefit. Not a numbers person? Let us do those calculations for you!
Refinancing a home is a big decision. While it takes time to determine the best options for you, it can be well worth the effort.