Refinancing your home loan/mortgage is an excellent way to reach other financial goals by saving money. If you’re considering a refinance, you will be happy to know that most of the steps are the same as when you applied for your first mortgage. But, some parts of the process are likely to be a little different. These tips may help you navigate through the process with ease.
Understand What Your Refinance Goals Are
When you refinance your loan, you can opt for a different interest rate, term length, and even type of mortgage. Your decision will depend on what you really want out of the refinance process. So, make sure you understand what your goals are – whether it is to save money on interest or lower the monthly premium. Doing this will help you choose the right type of mortgage loan.
Work out How Much Equity You Have in Your Home
Most lenders will need you to have a minimum of 20% in equity, but you may be able to refinance to a different loan with a lower equity percentage, provided you have a low debt-to-income ratio and a great credit score.
Check Your Credit Rating
If your credit score has increased (or at least remained steady) since you got your original mortgage, you could get a good rate of interest on your new loan. That said, a less-than-favorable credit score does not keep you from refinancing. So, make sure to check your options.
Get Quotes from Various Lenders
You can refinance with your current home loan lender, but you don’t have to. We recommend getting a few different rate quotes from at least three to four companies so you can compare the closing costs and interest rates and pick the most affordable loan. When comparing quotes, make sure that you check the APR and not just the rate of interest. That is because the APR is the rate of interest plus things like fees and discount points. So, this will be a higher (and more accurate) figure compared to the rate of interest.
