Is Home Refinancing Right for You

Is Home Refinancing Right for You?

There are plenty of homeowners who are taking advantage of the extremely low mortgage rates and refinancing their home.  But is home refinancing right for you?  Your home is your single biggest investment and your single biggest asset so before you take any steps when it comes to refinancing make sure you take the following things into consideration.

Run the Numbers

Don’t take the first offer that comes along, make sure that it makes sense for you.  Look at the costs associated with refinancing, how long the new mortgage will be and compare it to how much remains on your current mortgage.  Factor in the interest rate you are paying now and how does it stack up against the new rate.  There will be closing costs that you are going to have to pay all over again for the new mortgage and how long is it going to take you to recoup the cost of financing?  Here is a look at the costs of refinancing.

How Long do You Plan on Keeping Your Home?

Unless you live in a really hot real estate market make sure that you plan on staying in your home long enough to recoup the cost of the refinance.  If this is going to be the family home for the long term then great, but if not consider carefully whether you will lose money on a sale.

What is the Value of Your Home

Has the value of your home gone up since the original mortgage was taken out?  Does it make financial sense to take advantage of the increase in your home’s value?  Are you looking at taking out a larger mortgage to have more disposable cash on hand?

What does Your Credit Look Like?

What is your credit score and what is the amount you’re going to qualify for based on credit score, your income, outside debts and the new valuation of your home.  Are you going to be paying more or less overall and can you handle that financially?  Don’t forget how refinancing your mortgage will affect your taxes as well.  You might want to speak with an accountant before you take this step.

Will it be Worth the Hassle

As much as banks and mortgage companies try and make refinancing easier to do there is still a certain amount of hassle involved.  You have to put in time, effort and get together all the necessary paperwork the mortgage company is going to want.  Is your reasoning for refinancing sound?  You really need to make sure that this is the best course of action for your goals.

Lots of homeowners refinance for all kinds of different reasons, to invest, to pay off debt or to renovate their existing home.  But refinancing doesn’t make sense for everyone, just make sure that it makes sense for you.

The Best Time to Get a Mortgage

The Best Time to Get a Mortgage

Once you decide to buy a house then the next step is getting your mortgage in order.  The interest rate you end up with will depend on a couple of factors including what is happening in the market at the time.  You should also check out mortgage rate forecasts for the next year to see of waiting a couple of months won’t end up saving you thousands.  However, if rates are predicted to increase then you want to lock in now.  Knowing the best time to get a mortgage can save you thousands over the life of the loan.   Here are some other considerations in getting your mortgage.

Credit Rating

Your credit rating will also have a huge impact on your mortgage and what rate you end up with.  If you have less than perfect credit then you are going to pay a higher rate.  If the option is available to you then you might want to look into improving your credit score before you start shopping for a mortgage.  Even a few points higher can help you in the long run.

Shop Around

You can and should shop around for a mortgage and you also have the ability to negotiate terms as well. If you work with a mortgage broker they will do the shopping on your behalf pitching to various lenders until they find you the best terms and rates.  The mortgage company will lock in your interest rate after you are approved however if the interest rate is changing often you may not have the option.

If you have a home picked out to purchase or you are refinancing yours then you are going to need an appraisal, without a proper appraisal then the whole thing can fall apart.  This is particularly true if you are refinancing, you may think that your home or property is worth more than it is.  Without the appraisal you may not secure the financing you want.

Getting Approval and Signing the Paperwork

Once you have a commitment from a lender then you want to get a hard copy of it.  Today mortgage companies will rely on electronic signatures, but you will still want a hard copy in the event that they don’t want to honor their agreement.  Mortgage rates in the past couple of years have been pretty stable in and around the 4% range but there is no guarantee that will continue forever.