Refinancing your home loan can help lower monthly payments, saving thousands every year. However, prior to starting your refinance, Bankrate.com has some advice on how to make the process go smoothly.
In the wake of the housing market collapse, a number of homeowners are now underwater, meaning that they owe more on their home that the property is worth. If this sounds like your situation, you could benefit greatly from the Home Affordable Refinance Program. Those in different circumstances could capitalize on an FHA refinance or VA refinance to save money.
Weighing the pros and cons
Prior to committing to a refinance, you should consider any of the potential benefits and pitfalls. Start by examining how long you have had your current loan for and how much of your money has gone toward interest.
For example, if you have had a home loan for ten years, most of your payments have been for interest. By restructuring the loan into another 30-year fixed-rate mortgage, you will significantly extend the amount of time it might take to pay off your house. You might even owe even more in interest in the end, despite lowering your rate.
Additionally, refinancing into a home loan with a shorter lifespan and a lower mortgage rate can seem deceiving. Since you have less time to pay off the loan, you might be required to pay more every month. However, your end total will likely be far less.
Get important documents together
Prior to refinancing, you should get together some much-needed documents. This can include, tax forms, bank statements, credit reports, pay stubs and your mortgage information. Having these documents together will not only smooth out the process, but also can drastically cut down on the amount of time it takes to complete a loan.
Consider any fees
At the closing of your refinance, you may incur a number of fees associated with the process. These can include an application fee, credit check fee, appraisal fee and processing costs. Added up, these can sometimes amount to thousands of dollars. Knowing this, it is important to set aside available funds to cover these costs or negotiate to see if you can have any closing costs added to the loan balance itself.
Getting your personal finances under control is the first step to qualifying for a home loan. Freedom Mortgage offers some of the latest advice on comprehending a fluid housing market from improving your home value to tips on comparing mortgage loan rates.
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