You finally got your dream home and made through the hardest part, bought it. Now after a few years you want to refinance your home loan, so you start wondering if this is going to be easy or not. In fact there could be more paper work involved than when the first time you bought it. You can follow the step by step plan and assess for yourself as to what to do.
Step 1- Ask yourself if you need to refinance. There are always certain costs involved when you want to refinance. You may feel taking a refinance will lower your payment. Choosing a right tenure for your home loan refinance is a balancing act between an affordable monthly payment and reducing your borrowing cost.
Step 2- Make sure your credit score and finances are in order. Just like when you applied for your first mortgage, your financer will see your credit score and your other financial involvement. Keeping up with your credit is definitely worth your while. If you find some errors get them corrected. In addition to checking your credit, you should see that you have enough cash in savings to take care of things like closing costs, fees etc.
Step 3- Find a lending bank. Some home owners like to borrow from the same lender, while others prefer to shop around for the best rates. The most important thing is to work with a lender who has a solid record of customer service and affordable rates.
Step 4- Compare rates and programs. Finding a reliable, friendly and knowledgeable loan consultant will really pay off. Your lender can help identify the different programs and pick the best suited for you and makes sense in your situation, keeping you focused on your goals. He will help you choose a shorter or a longer period for your refinance as to what you want. Longer amortization period helps you capitalizing on a lower interest rate.
Step 5- Know your ‘all in’ costs. A home loan reapplication can trigger a bunch of fees, but remember you will get a clear estimate from each lender you consider, and don’t fall for the ‘no refinance cost’ line.
Step 6- Gather your paper work. This can be a problem because most of us do our work online. But you will have to gather all the paper work and your pay stubs whatever the lender wants.
Step 7- Lock your rate. You will have to decide whether or not, and when to lock in your home loan refinance rate.
Step 8- Have cash in hand. There are likely to be extra expenses, so be sure to keep some cash aside to cover them. It is listed in your loan estimate so it should not be a big surprise.
Refinancing, for the right reason, with good rate and suitable term, can enhance your financial position.
Read More About…All You Need to Know about Transfer of Your Home Loan