قالب وردپرس درنا توس
Home / Tips and Tricks / How to Refinance Your Home

How to Refinance Your Home



  1-home-chad

Buying your home was probably one of the most expensive (if not ) expensive purchases you've ever made. One of the ways to lower the total cost of your home is through lower monthly payments. Refinancing helps with this.

Refinancing your mortgage is when you take out a new home loan to replace your current loan. You will receive a new interest and a new monthly payment. That also means you get new terms. So, if you've been in a 30-year mortgage for a few years, refinancing will start the clock again.

If you're considering refinancing your home because of the historically low interest rates, you're not alone. Millions of Americans are requesting an application for mortgage refinancing during the coronavirus outbreak, leaving many lenders behind. (That also means that processing your application may take longer than usual.)

You can still refinance even during COVID-1

9 . Here's how to get started.

1. Determine your & # 39; why & # 39;

Before browsing lenders, ask yourself what the purpose of refinancing is. Such as:

Do I want a lower interest rate? When you look at interest rates that fluctuate and float at one of the lowest rates ever, refinancing seems attractive. If you bought your home when interest rates were higher, refinancing to secure a lower interest rate also means a lower monthly payment. You can also refinance to move from a variable rate mortgage to a fixed rate mortgage.

Do you want a lower monthly payment? You usually get this through lower interest rates, but it also comes when you extend your loan terms. For example, if you have a 15-year home loan and you refinance for a 30-year period, your monthly payments in the new terms will be lower.

Do I want to repay my loan earlier? The sooner you pay off your loan, the less you pay in interest. But that also means higher monthly mortgage payments. You can refinance a mortgage from 30 years to 20 years or 15 years. You get higher monthly payments, but you are also more debt free.

Do I need some cash? If you take out a new loan for more than you owe, you can deposit the difference in cash through a paid refinance. This is a good way to tap into equity in your home.

2. Increase Your Credit

Refinancing a mortgage is taking out a new loan, so you need to get your credit score in top shape to get the lowest interest available.

If you have outstanding debts in addition to your mortgage – such as student loans or a car payment – try paying them off and lowering your debt-income ratio. Lenders like to see that you have enough cash on hand to pay your mortgage in case something happens, such as the loss of your job or a medical emergency that makes you lose money.

Check your credit report. You can do this for free at AnnualCreditReport.com. See if there are any mistakes or bad numbers you can remove to boost your credit score. The higher your credit score, the lower your interest rate.

Read more: How to get a free weekly credit report for the next 12 months

3. Calculate Your Potential Payments

If you've determined why you want to refinance your home, see if the change is within your budget. For example, if you want to pay off your mortgage earlier, what do your new payments look like under a 15-year mortgage? You can also calculate what a new 30-year loan would look like with a reduced interest rate. Check out several refinance calculators at:

Keep in mind that refinancing a mortgage means a new round of closing costs – somewhere between 2% and 6% of the loan. Unless you find a loan that directs your closing costs to your loan (which still means you pay those costs) or you take out a loan with no closing costs, you'll need that cash if your application is approved.

4. Browse lenders

After you have a good idea of ​​what you want to pay, you can find out which lenders offer the best deal. Pay attention to interest rates and fees, but also consider the entire process, including:

  • Easy Apply: Does the lender offer an online application or do you need to sign up with a local branch?
  • Processing time: Do you know how long it takes to take out your new loan?
  • Requirements: If your credit score is not in the best form, are you still eligible for refinancing, and if so is it the best rate you can get?

There are plenty of places to shop around for lenders and rates online, but keep in mind that rates generated through online tools don't always take into account your specific situation and may change when the loan is actually being pursued.

You can also try your bank or credit union. Your local institution likely offers home loans and refinancing and has the tools to calculate what you would pay if you refinanced your mortgage. Another option is to try a private mortgage broker.

5. Apply and close

Once you have found some of the best lenders, you can submit your applications. Try to complete your applications within a few weeks of each other. Since each application activates a hard credit check, multiple applications will tell the credit bureaus that you are shopping or shopping for the best rate. Instead of multiple hard credit questions, only one will show up on your credit score. This means that you will not be hit with a lot of hard credit checks, which would drop your score.

Once you have chosen the best lender, you can lock your interest rate. Since interest rates often fluctuate, yours may rise at any time before closing. Once you pin your rate, it won't change even if the market causes it to rise. Rate locks typically last 30 to 60 days (sometimes longer, depending on your lender), which is usually the time it takes to take out a new loan. Some lenders even guarantee that if interest rates drop before closing, you will get the lowest possible interest rate. Then it is time to finish.

There are plenty of different reasons to refinance your home, so make sure you choose the best lender, interest rate and repayment terms that best suit your finances. If interest rates are too high, there are too many fees, or if you can't find a lender to work with, you can postpone the refinance for the time being.


Source link