Questions to Ask Yourself When Considering Mortgage Refinancing
Refinancing can be great for several reasons. If you have decided that refinancing is what you need to do, there are a number of factors that you should look at before taking the plunge into possibly more debt. Lower mortgage rates may or may not be suitable for you in the long run. If you are going to participate in mortgage refinancing, here are many things that you should consider before you do.
How Much Will it Cost?
Do you Have any Equity?
Will You Need Private Mortgage Insurance?
What's Your Debt to Income Ratio?
Terms and Rates
Mortgage refinancing is not free. You will still have to pay things like closing costs. There are some cases where you can get these costs rolled into the loan; when people do this, they tend to walk away with higher interest rates. When you are out there shopping for a loan, make sure you are getting the best deal possible. Make sure that it's not going to cost you more to refinance than if you hadn't.
Pretty simple, take a look at the amount of equity that you have in your home. Most banks will not allow mortgage refinancing to homeowners that have little to no equity in their homes. Simply put, there is nothing in it for the lending institution. Make sure you know the value of your home and the amount that you still owe on your current mortgage, if you have some amount of equity, a lender should be able to help you figure out what to do next.
You may have to foot the bill for this if you have less than 20% equity in your home. If you are not currently paying for this, it could significantly add to the cost of your mortgage refinancing. When you see PMI in the number, don't glaze over it, it could be the difference between going through with it and not.
Rules change over time, and you may have recently maxed out a credit card. Debt to income ratios for mortgage refinancing may have changed. That is something to think about before walking into the bank. Also, the higher your debt to income ratio, the higher rates you are likely to pay.
Do you know what your credit score is now? Your credit score changes over time a well. It is essential to keep on top of it in the absence of mortgage refinancing. In any case, you should have a good idea of what you can demand from the banks once you know what your credit score and standing is.
While going through the mortgage refinancing process, it can be easy to forget about the duration of your new loan. You will be so focused on getting that new rate you may not realize that you just entered into a shorter time frame loan that you will not be able to afford. Make sure that you have clear goals about the rate and the term of the loan.
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Mortgage refinancing is a big decision. Let us help. Contact our professionals today.