Refinancing your home can be a terrific way to lower your monthly payments, decrease the interest rate, change the types of loan you have, or even a way to get some extra funds to help pay off bills or a remodel. It may not be the best decision for you to make though, depending on your personal numbers (which we will discuss later). On the other hand, it may be an opportunity that you need to take sooner rather than later.
If you decide that you genuinely want to go ahead and refinance you should take a few moments to go through the tips below. It gives you a checklist that you need to follow, as well as some vital information that you may not.
- Why: You need to ask yourself why you want to refinance. There are many reasons why you may want to refinance, but you need to know why and if it is feasible to do so. We can look at some reasons why before we get into the rest.
- Lower Payment: This is one of the most common reasons why people want to refinance their homes. This will give you a chance to adjust your terms. This is a good move to make when the interest rates are down, or when the values of the property are up. If you catch both at once you are golden.
- Decrease Length of Loan: This is another common reason. With a good refinance option, you can have the same payment amounts, but decrease the time that you must pay. Sometimes you may even be able to get a lower payment and decrease the length of the loan.
- Decrease Interest Rates: This can go hand-in-hand with the first point covered, but it is its own reason. Interest rates can eat at your pocketbook and your mind. Any way to decrease the money that the company is tacking on to your original amount, the better off you will be.
- Cash-Out Refinance: If you need some extra cash to remodel or pay off some bills you can go with this option. When you do this, you will need to have some equity built up to make it worth the effort and cost.
- Mortgage Insurance: Some programs and lenders will demand that you get mortgage insurance, which is expensive. You can opt for this option if you are in such a position.
- Check Your Credit Report: You need to go through your credit report with a fine-toothed comb. See if there is anything that you can do to increase the score, make the history more stable, or remove information that is not true or that should not be on it.
- Compare Your Options: You need to go through your options and pick the one that best fits your needs, and that does not charge you an arm and a leg. The best way to do this is to go online and use a comparison site, like iSelect. They will do all the legwork for you by matching your needs to the mortgage lenders that are in their databases that may be willing to collaborate with you. All you will need to do is go through them and contact the lenders that interest you.
- Have Your Documents Ready: Since you are refinancing that means you have been through this process at least one time before. You need to gather all the documents that you will need to show and have them ready to go. The most common documents that they will ask for are paystubs, bank account statements, and the last couple of years of income taxes.
- Lock Your Interest Rates: Many lenders will offer this service. Some will charge you for it, while others will offer it free of charge. This is an important tip that you need to follow because the market is volatile. As it bounces up and down, your interest rates will follow. If this is the way your refinanced loan will be, there is no reason to do it because you are not going to end up saving any money. In fact, you may end up being worse off in the end.
- Be Aware of Closing Costs: Unless you go for a refinancing option that removes the closing costs (it increases the interest rates) you will be charged closing fees. The closing costs can be a substantial amount so make sure you know what the charges are, and how much they will be.
That is all that there is to saving money on a refinance loan. It is important to read all the offers completely, and then compare the ones that you think are the best options. Remember that the one offering you the lowest rates may not be the best. Make sure that there are no hidden fees, and that the new loan is what you are wanting and needing.