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Refinancing tips for homeowners
Tip #1 -- Get a good faith estimate
A good faith estimate is supposed to contain all the refinancing fees that will be applicable when you take on the new loan. The estimate should list the following fees: appraisal fees, credit report fees, discount points, flood certification fee, origination fee, owners title insurance fee, recording fee, settlement fee, tax service fee, title insurance fee, and transfer taxes. Make sure you calculate your break even after getting this good faith estimate.
Tip #2 -- Home equity
Home equity means how much of your home do you own. As property rates have increased, you could end up owning more than 40% of your home. In this case, refinancing makes no sense as you will essentially be giving up this ownership. On the other hand, refinancing your home makes sense if you have low equity in your home. The best way to find out your home equity is by visiting a lender and discussing your individual situation. Homeowners with 10-15% equity are perfect for refinancing.
Tip #3 -- Debt to income ratio
This is a simple calculation in which the lender calculates just how much of your income is available to clear debt payments. You should know that lenders have become quite strict with debt-to-income ratios. It would help if you have a high income, a stable job, and no loans. Most lenders will try to keep their monthly payments to less than 30% of your income. We also recommend you pay off any existing credit card or car loans before you opt for refinancing.
Most homeowners focus only on the loan rate. However, if you want your refinancing to make sense, you should have the lowest interest rate possible for the longest time period as this will get you very low monthly payments. On the other hand, if your goal is to complete the loan quickly, you should choose a loan with a low interest rate for a very short time period. This will mean higher monthly payments but you can modify these payments to suit your budget.
Tip #5- Check points and rates
When you compare lenders, make sure you compare points and rates. Points too, can lower the interest rate. Calculate how much you will be paying in points on the loan to get the best deals. Visit us here for best deals.
Refinancing your loan is a major financial decision. If you do it correctly, you can save a ton of money on your loan payments. However, this is a decision that should be taken carefully and only after you have done a lot of research on the refinancing process and after understanding the benefits you could get.
