Refinancing your home mortgage seems like a good idea. Interest rates are at an all-time low and it's a good idea to lower your current monthly payments by refinancing your loan. But the process is lengthy and complicated. Before you actually start contacting lenders, here are a few things you should know.
Be careful with advertisements -- Lenders do advertise low interest rates. However, a lot of vital information like closing fees, attorney fees, credit check fees, etc. are not included in the advertisement. Advertisements could also promote low interest rates and low monthly payments but these could increase substantially later on. As a result, we recommend you research as many lenders as possible before you sign on with a company. To get a complete idea of rates and fees, make sure you ask for a 'good faith estimate.' This estimate is legally required to contain all fees, rates and other payments that you have to make to the lender. You can also use this estimate to bargain for a better rate with lenders. For more information visit this website.
Check your credit -- Unfortunately, good credit is mandatory to be eligible for a refinance. Candidates with an average score of 600 or more are much more likely to get a better deal. Your lender will also consider other factors like outstanding loans, credit cards being used, length of credit history, co-signees, guarantor signatures, etc. It's a good idea to take a few months to repair your credit and desist from opening new bank accounts or credit cards. The higher the credit score, the better the interest rate you will get.
Prepare your documents -- Although lenders are willing to renegotiate loans, they do require extensive paperwork. Make sure your credit score, bank statements, a statement from your lender listing payments made and payments pending, pay stubs, asset statements, offer letters or job contracts, tax returns, bankruptcy discharges, property information, etc. ready for the lender. The most detailed paperwork you have, the better the chances of getting a refinance approved quickly.
Breaking even -- Before you even consider taking on a refinance, you should consider when the new loan will break even. After calculating the break-even rate, you should know that homeowners with loans less than $100,000 will not benefit much from refinancing. Although we cannot explain the entire process here, we do recommend you find an online calculator that will tell you whether a refinance process is feasible or not. Make sure you use a calculator that is attached to a financial institution or international lender to get an accurate quote.
Be particularly careful if you are considering shifting lenders. Most lenders do charge hefty closing fees and the new lender will charge you additional fees. These fees may run into thousands and you could end up paying much more than you anticipated. Lenders do offer no-cost refinancing but this means that the closing costs are included in the loan. You will have to pay a slightly higher interest rate to cover these costs. However, if you do your research properly, you could end up with a great deal on your refinance rates and a much lower-than-expected monthly payment.
Be careful with advertisements -- Lenders do advertise low interest rates. However, a lot of vital information like closing fees, attorney fees, credit check fees, etc. are not included in the advertisement. Advertisements could also promote low interest rates and low monthly payments but these could increase substantially later on. As a result, we recommend you research as many lenders as possible before you sign on with a company. To get a complete idea of rates and fees, make sure you ask for a 'good faith estimate.' This estimate is legally required to contain all fees, rates and other payments that you have to make to the lender. You can also use this estimate to bargain for a better rate with lenders. For more information visit this website.
Check your credit -- Unfortunately, good credit is mandatory to be eligible for a refinance. Candidates with an average score of 600 or more are much more likely to get a better deal. Your lender will also consider other factors like outstanding loans, credit cards being used, length of credit history, co-signees, guarantor signatures, etc. It's a good idea to take a few months to repair your credit and desist from opening new bank accounts or credit cards. The higher the credit score, the better the interest rate you will get.
Prepare your documents -- Although lenders are willing to renegotiate loans, they do require extensive paperwork. Make sure your credit score, bank statements, a statement from your lender listing payments made and payments pending, pay stubs, asset statements, offer letters or job contracts, tax returns, bankruptcy discharges, property information, etc. ready for the lender. The most detailed paperwork you have, the better the chances of getting a refinance approved quickly.
Be particularly careful if you are considering shifting lenders. Most lenders do charge hefty closing fees and the new lender will charge you additional fees. These fees may run into thousands and you could end up paying much more than you anticipated. Lenders do offer no-cost refinancing but this means that the closing costs are included in the loan. You will have to pay a slightly higher interest rate to cover these costs. However, if you do your research properly, you could end up with a great deal on your refinance rates and a much lower-than-expected monthly payment.