6 Things to Keep in Mind Before Refinancing Your Mortgage

Mortgage refinance can be a very overwhelming thing and you may not know what you need to prepare beforehand. Don’t worry as this blog will prepare you so that you’re ready for when the time comes to refinance your mortgage.

1. Why are you refinancing your mortgage.

Before applying for refinancing you must always consider why you are refinancing because it can be a time consuming and expensive process. So think carefully about your reason.

Here is one reason that you might want to get a refinance. You may want to get a lower interest rate.

2. Find out about your home equity.

Almost all mortgage lenders would prefer that you have a minimum of 20% in home equity. The higher your equity is, the higher your chances that you can get a lower interest rate or a lower fee.

To find out the equity of your house, you can subtract the total mortgage loan that you owe from your house’s current value on the market. You can contact a local real estate agent to get an estimate of the value of your house. You should also have the documents to any improvements made to the house by you. Cleaning up the house would also be a good idea.

3. Find out about your credit score.

Knowing your credit score is very important because this will be the biggest variable that mortgage lenders consider when determining how low or high your rates should be. If you have a low mortgage rate, you should find ways to improve your credit score before applying for the loan.

4. Find out about your debt to income ratio.

Mortgage lenders now have been stricter when it comes to debt-to-income ratios. If you have taken on more debt since you acquired the existing mortgage, lenders may be hesitant to allow a loan. Mortgage lenders will usually allow a debt-to-income ratio of about 35%.

5. Look around for the best mortgage lender.

Before applying for the loan, you should look around as you may get a better deal from a different mortgage lender. You can search online to try and get good deals, look at rates given by big banks. If you have a deep-rooted relationship with a financial institution, you may want to take a look if they offer home refinancing. Keep in mind that your current mortgage lender may not be giving you the best deal.

6. Think of the questions you want to ask.

After finally finding the right mortgage lender, you should think up some questions to ask the lender. Don’t be afraid of asking anything, as this is ultimately your choice and you’ll be living with it for the decades to come.

Now that you’re armed with knowledge, you can apply for your home refinance without having to worry that you’re not prepared enough.