Many people choose to refinance their mortgage to get a better rate or to change the time length of their mortgage loan. If you're thinking that you may be able to benefit from mortgage refinancing and are thinking of going through the process, you'll want to make sure that you're well prepared. Here are some things to consider before you refinance your mortgage:
Know Your Home's Equity
You'll need to have an idea of your home's equity before your refinance. The more equity your home has, the better off you'll be when refinancing.
Know Your Credit Score and Credit Situation
You should also be well aware of your credit score and credit situation before you decide to refinance. Your credit will play a big factor in the rate and terms that you'll be able to get. If you're not in a good spot with your credit, you may want to hold up before you refinance.
Prepare to Pay Closing Costs
Just like when you first purchased your home, you will be responsible for certain closing and lending costs when you refinance. It's important to be aware of this as it factors into how much money you need to have ready when you refinance. Some costs may be able to be rolled into the loan, while others may need to be paid outright. You can talk to a lender in advance to get an estimate of all of the fees that you will need to pay.
Know Your Break-Even Point
Before you decide to refinance it's a smart idea to know your break-even point. You want to figure out your total cost to refinance, figure out the monthly mortgage savings, and then figure out how long it will take you to recoup your costs. This can help you decide if now is the right time to refinance or if you should hold off until you pay off more debt.
Understand That Your Loan Will Start Over
While refinancing can have many benefits, just be aware that you're starting over on the time length of your loan. For example, if you originally had a 30-year loan and have been paying on it for 8 years and decide to refinance with a 30-year loan, you'll be paying for 30 more years, not 22 years.
Keep these tips in mind so that you can make the best choice that makes sense for your financial situation. If you want to learn more about the home refinance process or if you'd like to get some mortgage refinancing quotes, reach out to a mortgage home lender.
Unfortunately, personal finance is not a subject that is widely taught in schools. And yet, to be a functioning adult in society, you need to know the basics about earning money, saving money, taking out loans, paying interest, and so forth. Money makes the world go 'round, and you won't get very far in the world without a basic money education. There are many ways to learn more about money, from reading books to visiting a personal financial advisor. You can start by reading some of the articles on this blog, which address a wide range of financial topics for people in every situation.