Mortgage Refinancing Tips: To Refinance or Not To Refinance, That Is The Question
Refinancing your mortgage may be a great way to save money, pay off your house sooner, or tap into your home's equity. Here is what you should consider before refinancing.
Check Your Home's Equity
Before you even consider refinancing, you need to know your home equity. If you have little equity in your home, it may be difficult to get a loan, and it will certainly be hard to get a good deal if you do. Borrowers with at least 20% equity in their home will usually have the best chance of refinancing.
What's Your Objective?
Consider your refinancing goal. Are you're looking to lower payments, interest, or shorten the loan term? Do you want to change from an FHA to a conventional loan?
Consider the Costs
Many people are drawn to "no-cost" refinancing loans, but it usually means paying a higher interest rate. With a long-term loan, the interest can add up. If you're willing to increase the principal loan, a lender may offer to add the costs to the loan, but this will usually mean higher payments. Consider which will work best for you.
If you can pay closing costs out of pocket, you may save more in the long run. If your credit is very good, lenders may be willing to negotiate and compete for your business, so shop around and compare offers.
Do Your Homework
Get online and begin comparing lenders. Find out what types of programs they offer, get their qualification guidelines, and check the costs. After narrowing your choices down based on your needs, get quotes from three different lenders so you can compare offers.
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