A mortgage refinance is one way to restructure your current home loan on better terms. When should you consider refinancing your mortgage? It’s the best option for you if your existing home loan costs you a lot more than it should.
Here are some signs that indicate you should refinance your mortgage:
- You’ve recently gotten a new job with a higher salary.
- You pay a higher interest rate than the current market rate.
- You want to lower monthly payments by refinancing to a longer loan term.
- Your loan is at a high risk of default, foreclosure, or short sale. In this case, it’s better to refinance your mortgage before you lose your home.
- You’re paying more than you should because you didn’t understand the terms or costs of your current loan.
- You’re taking advantage of your home’s equity. One common idea is to use the equity in your home to purchase the next house, avoiding the need for a down payment.
The only exception to refinance your mortgage is if you’re buying a new home. It doesn’t make sense to refinance your mortgage if you’re saving for a down payment.
Tips and Tricks for Refinancing Your Mortgage
You may be getting ready to refinance your mortgage. These are some tips to make the process as fast and straightforward as possible:
1. Determine Your Credit Score
Refinancing your mortgage is a huge financial decision, and you have to protect yourself from any unexpected issues that might arise. Before you refinance, you need to check your credit score. If it’s less than 750, you may not get approved for the loan. A good credit score allows you to get the best interest rate on the market.
2. Know How Much Your Home Equity Is
It’s essential to understand the value of your home before you start the refinancing process. Doing so will give you an idea of how much you can have should you consider cash-out refinances. You can get an idea of your home’s equity by contacting your bank, mortgage broker, or the financial institution that holds your mortgage.
3. Make Sure You’re Getting the Best Home Loan Rate
A home loan rate is the specific interest rate for your home mortgage. It’s the price you pay to borrow money to buy your home. A reasonable home loan rate is low and competitive.
4. Understand the Terms and Conditions
It’s essential to understand what you’re signing up for. Be sure to read the mortgage documents carefully so that you and the lender are on the same page.
5. Ask for the Closing Costs
Closing costs are real estate fees you need to pay when buying or refinancing your mortgage. These fees are usually paid through your closing statement. If your mortgage broker or lender can’t tell you the exact amount, it’s not a good sign.
Some of the fees to prepare for are the following:
- Application fee
- Appraisal fee
- Inspection fee
- Attorney review and closing fee
- Title search and insurance
6. Reach out to a Local Mortgage Lender
There are many options to choose from when it comes to mortgage lenders, but the most important thing you need to do is find a local lender—someone who can visit you at home to answer questions and someone you can contact quickly. A lender who clearly and correctly explains the terms and conditions is a good sign.
It’s essential to protect yourself from any financial surprises when it comes to refinancing your mortgage. Don’t rush into signing any mortgage documents. Keep in mind that you are signing a huge financial agreement in which you’ll be paying on your home loan for years to come. Be sure to take your time and contact a mortgage lender that you can trust.
If you plan to apply for a mortgage loan in Sacramento, CA, we can help. At Hawkins Home Loans, we assist our clients in finding the best financing support that fits their needs. Let’s discuss your options!