If it is time to either lower the interest rate on your mortgage or if you are thinking of doing a significant renovation, then it may be wise to consider refinancing your home. Before you contact a mortgage broker, consider these tips for getting prepared.
Calculate the Math
Be sure to assess your budget and overall finances before you refinance. A mortgage calculator online can help, but there are other things to take into consideration. Consider the loan term in the number of years and your age for when you plan on retiring. Opting for a 30 year loan may not be a great move if you are closer than that to retirement. There are other loan terms and packages like a 15 year mortgage term which may be more appropriate. Just make note that this will be a higher monthly payment due to the shorter term.
Check Your Credit Score
The three credit bureaus include Experian, TransUnion and Equifax and Federal law allows you to check your credit report once per year at no cost to you. It is a good idea to check your credit annually so you get learn your credit’s strengths and weaknesses. This will also give you the opportunity to fix any errors that may be on the report which can help you improve your score.
Lenders will want to know that you have credit available so paying down your debt is best. It is also a good idea to increase your savings so that you have a few months of living expenses in case of a job loss or the like. Even if you are not able to have a lot of money in savings, a refinance still can be a good option. Speak with your lender about your whole situation and they will help decide what is best.
Your Home’s Value
Lenders will want to see that you owe less than 80% of your home’s value on your existing loan. An appraisal will be conducted to obtain a fair market value. Before you embark on this process you may want to estimate yourself what your home is valued at by looking up recent sales of similar homes in your area.
Research Mortgage Lenders
Unless there is a good reason not to use your current lender, they would be the best place to start. Most mortgage lenders will want to retain your business so they will usually match the lowest rates that are available. In the end, be sure to do your own homework on rates and shop around so that you know you are get the best deal.