There are many people who simply put off refinancing their homes because they fear the process will take too long and will be too painful. More people today are taking advantage of the lowest interest rates in years to squeeze all the money they can out of their homes. A refinance typically lowers your cost after refinancing. A new mortgage with a rate that’s just a half-percent lower may save you hundreds of dollars each month. Take these 4 steps to refinancing your home and you could be paying less per month in no time at all.
Step 1: Doing Your Research
Don’t assume because we are currently experiencing low interest rates that you will get a 30 year fixed rate and the decision is made. The interest rate will vary significantly from one location to another, so ask your mortgage broker to look for competitive rates with different providers. The closing costs alone can vary greatly. Simply determine exactly how much you will save each month versus what it will cost you over the life of the loan. An experienced mortgage broker can help you evaluate the best mortgage product for your situation.
Step 2: Gather Your Documents
If you took out a mortgage before or during the housing boom, you may be surprised at the increased scrutiny lenders now apply to potential borrowers. You’ll need to prove you are worthy of the mortgage by providing 2 months bank statements and 2 pay stubs and 2 W-2’s or tax returns, to show exactly how much income you have and how much you have in reserves.
Step 3: Choosing Your Terms
Using a mortgage calculator is your best friend when considering refinancing. Depending how long you plan on staying in the house, those loan rates can vary significantly. Choosing a shorter length loan will definitely cut down on the interest you pay, you just have to be aware how the monthly payments will change. If you plan on spending a significant amount of time in the home and can afford it, a short term will put all that interest back in your pocket at the end of the loan.
Step 4: Adding Up the Costs
Be aware there will be many costs involved with refinancing a home loan. Things like document preparation fees, appraisal fees, and credit reporting fees all add up when it is time to pay. Do your homework and understand these charges before you sign on the dotted line because you will be paying them when the deal closes. Mortgage rates can fluctuate day to day, so once you find the right mortgage lender that is right for you, call and lock in your rate.
These 4 steps to refinancing your home could save you thousands of dollars, and do not take that much time to implement.
Here at The Mortgage Network of Ohi, Inc we offer a lender credit to offset your closing costs and prepaids. This it not typically offered by most banks and other lenders.