How to Refinance Your Home in 7 Easy Steps
With interest rates on the rise, you might be wondering if you should refinance your property before they continue to climb.
While the Federal Reserve expects that raising interest rates will help to tame rising inflation, the repurcussions of higher mortgage rates aren’t entirely known. If you have an adjustable rate mortgage, for example, you might consider refinancing to a fixed rate with the expectation that rates could continue to increase.
Are you wondering how to refinance your home?
Let’s take a look at what you need to know.
1. Create a Goal When It Comes to Refinancing
There are a number of different reasons you might want to refinance your mortgage. For example, you might want to lock in a lower interest rate in order to lower your monthly payment. Or maybe you want to switch to a shorter loan term in order to let you become mortgage free faster.
That being said, there are costs to refinancing. It’s a good idea to have a sense of what your goals are to ensure that refinancing is the proper path to take.
2. Look Into Your Home Equity
You might find that you can get better loan terms when you have more home equity. You can get a rough estimate of your home equity by taking your home’s current market value and subtracting your loan balance from it.
3. Take a Look at Your Credit Score and Report
You’ll also want to take a look at the state of your credit score and report before you refinance your mortgage. This will have a big impact on the rates that lenders are willing to offer you. If your credit score is on the lower side, you might want to work on improving your credit before applying.
4. Determine If It’s Worth It to Refinance Your Mortgage
When you’re learning how to refinance your mortgage, an important piece of information is that you’ll be responsible for closing costs. They usually cost between 2 and 5% of the amount of money you’re borrowing. Depending on how long you plan on owning the property, the cost savings may or may not be worth it.
5. Gather the Necessary Paperwork
Just like when you originally bought the property, you’ll need to gather a bunch of financial paperwork before refinancing. You’ll need at least your current home loan, info about home insurance and property taxes, two years of W-2s, and your latest pay stubs.
For self-employed people, you’ll likely need two years of bank statements and potentially other paperwork to prove your income.
6. Find the Right Lender
You don’t need to go with the first lender that pops up in your Google search. Shopping around can save you money. Consider checking out Securing Home Mortgage for your home mortgage needs.
7. Find the Best Rate and Lock It In
Did you find a lender that offers you a great rate? Consider locking it in to make sure your rate doesn’t go up before the closing happens. You’ll want to time this well to ensure that the rate lock doesn’t expire before your closing.
Learning How to Refinance Your Home
Refinancing can be a smart financial move in some instances, but sometimes it’s not worth the time and closing costs. Consider whether or not refinancing makes sense for your particular situation before applying.
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