If you’re unhappy with the high-interest rates on your mortgage, it may be a good idea to pursue mortgage refinancing.
Refinancing your home loan will potentially allow you to get a better deal. This might mean taking up a new home loan with an improved interest rate or a longer loan period, for example. Refinancing typically helps homeowners free up money in the short term, and often saves them cash in the long term.
Applying for a home mortgage refinance is a complex process, and can be risky for those who don’t take the time to learn about both the benefits and costs involved. As you consider your refinancing options, here are nine things you should know.
Your Credit Score Will Determine Whether You Should Refinance
Just like all major investments in life, your credit score is crucial to refinancing your home mortgage.
Borrowers with perfect credit history can expect few problems if any in their quest to refinance their mortgage. A great credit score demonstrates responsibility and trustworthiness to banks and creditors, making you more likely to be accepted.
Refinancing can be risky the worse your credit score is, or if you’re too much in debt or even bankrupt. Borrowers with credit scores as low as 620 can actually apply for a mortgage refinance with the Federal Housing Administration (FHA) or the Department of Veteran’s Affairs (VA).
Get All of Your Documents in Order Before You Refinance
A lender won’t set up your new mortgage payment program if you don’t provide a complete picture of your financial history. Here’s what you should gather:
- An accurate, up-to-date credit report
- Property tax bills
- Proof of income, bank statements, tax returns
- A recent appraisal of your home