There are a variety of reasons for refinancing your mortgage, regardless of what the economy is doing. Many homeowners choose to refinance their mortgages to qualify for a lower interest rate, lower their monthly payment, or cash out equity in their homes. If you are a homeowner considering a new mortgage loan, there are steps you can take to ensure hassle free refinancing.
Carefully Review Your Finances
Before you refinance your mortgage it is important to ensure your finances are in order and that you do not have inaccurate information in your credit reports. The credit agencies that maintain your credit records are prone to errors and having mistakes in your credit reports will significantly reduce your credit score. Your credit score is used to determine the interest rate you will qualify for; you want this score to be as high as possible.
Have Cash on Hand for Closing
When you refinance your mortgage you will go through the same process as when you secured your original mortgage. You will be required to pay many of the same fees you did when you acquired your original mortgage. These fees include an appraisal, insurance, title search, and lender fees. You can expect to pay between three and five percent of the loan amount in closing fees; however, these fees vary from one lender to the next, don’t be afraid to negotiate for lower closing costs.
Cash Back Debt Consolidation
When refinancing your mortgage you have the option of taking cash back from your home equity. You can use this cash to pay off your other high interest debt. If you use equity in this manner it is important to understand that debt consolidation does not eliminate debt, it simply moves it around to make it easier to manage. If you continue the pattern of spending that created youru existing debt you will find yourself sinking further in debt and wasting the equity you had in your home.
You can learn more about your mortgage refinancing options and common homeowner mistakes by registering for our free mortgage guidebook.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
