We’ve blogged before about the potential advantages of refinancing. Such as how it can help you get lower monthly payments, pay off your home loan more quickly, or about how it can help you consolidate debts and gain more financial freedom.
All of that is true, but it’s important to emphasize that refinancing is just one tool in the mortgage toolbox. It’s certainly useful, but it’s not the right move for everyone. As you consider whether you might be a good candidate for refinancing, we invite you to ask yourself the following questions:
How Much Equity Do You Have in Your Home?
If the total value of the home is more than your outstanding mortgage balance, then you do have some equity in it. However, for a refinance to be possible without private mortgage insurance, you’ll likely need to have at least 20 percent equity. You can still apply for a refinance with low equity, but be sure you talk with your lender about the pros and cons.
Do You Have Good Credit?
Credit scores factor into refinancing, and if you have below a 620, you may have a hard time with the refinancing process. Again, ask your lender about the specifics.
What Are You Trying to Achieve?
Are you refinancing in order to shorten your loan term? To get lower monthly payments? To get cash from your home equity? Your specific financial goals will determine which refinancing product you choose.
What Are the Terms of Your Current Loan?
It’s important to know where your loan currently stands as you think about making possible changes to it. Things to consider are what your loan term is, whether it’s fixed or ARM, etc.
How Long Do You Plan on Staying in the Home?
You’ll have to pay closing costs to refinance, which means you will need to stay in the home for a certain period of time in order to break even. This is something that’s fairly easy to calculate, depending on the rates you get and the value of your home. A Loan Fleet lender can help you determine these numbers.
Do You Have a Second Mortgage?
Having a second mortgage or a second line of credit will complicate the process considerably—something else you’ll want to discuss with your Loan Fleet lender.
Refinancing Could Be the Right Move for You
Obviously, there is much to consider and we would love to walk you through the process. Reach out to Loan Fleet today to ask whether refinancing could be the right step for you!