Your house is a financial investment. You can use your home to leverage your investment by refinancing. You may want to refinance for various reasons, including obtaining cash from your home, lowering your payment, and shortening the term of your loan. You can learn more here about refinancing your mortgage and other real estate-related issues.
What is mortgage refinancing?
A mortgage refinances when you obtain a new home loan to replace your current one. If you can refinance into a loan with a lower interest rate than you currently have, you will save money on your monthly payment and the interest you will pay over the loan term.
Generally, if you can reduce your interest rate by at least half a percentage point and plan to stay in your home for at least a few years, it’s worth considering a refinance.
What are the steps to refinance your mortgage?
If you want to refinance your home, you should:
- Set a clear financial goal
There should be a compelling reason for refinancing, whether to lower your monthly payment, shorten the term of your loan, or access equity for home improvements or debt reduction.
- Check your credit score and history.
You must qualify for a refinance just like you did for your original home loan. If your credit score is higher, you will have better offers for the refinance from rates lenders, and it is more likely underwriters will approve your loan.
- Determine how much home equity you have
Your home equity is the total worth of your home, less the amount owed on your mortgage. Check your mortgage statement to discover what your current balance is. Then, use online home search engines or a real estate agent to determine your home’s current fair market value. The difference between the two is your home equity.
- Get your paperwork in order.
Prepare bank/brokerage statements, federal tax returns, current pay stubs, and any other documents your mortgage lender requires. Your lender will also consider your credit and net worth, so be transparent about your assets and liabilities.
- Prepare for your home appraisal.
To assess the current market value of a home, mortgage lenders often need an appraisal. An outside appraiser will assess your house based on specified criteria and comparisons to the value of similar properties previously sold in your community.
Get professional help today.
If you need help with real estate issues, you should always go to the professionals to ensure you get the best kind of help possible. An experienced real estate lawyer can help you and provide the legal advice you need.