Home Mortgage Advice for Owners Looking to Refinance

Individuals looking for home mortgage advice often inquire about refinancing. Mortgage refinancing involves replacing one’s current mortgage with another, more affordable home loan. People often choose to refinance their mortgage when interest rates dip and they can get a more affordable rate, or to simply lengthen their loan term to make monthly payments more affordable. Read below to learn helpful home mortgage and refinancing advice.

Why are You Refinancing?

Refinancing can be a confusing process if you’re unsure of your ultimate goal. The first step in refinancing is to determine your purpose. Here are three common reasons people refinance their home loan.

  • To Have a Lower Payment: reduce your monthly mortgage payment by locking in a lower interest rate or lengthening the loan term.
  • To Convert an ARM to a FRM: with a rising Adjustable Rate Mortgage, you may be able to lock in a lower rate by refinancing to a Fixed Rate Mortgage.
  • To Reduce Overall Debt: Homeowner’s in need of additional cash can opt for a Cash-Out Refinance. The borrower can use the additional cash to pay other, higher-interest debt (e.g. credit card debt).

Select a Reputable Lender

Once you have determined your purpose for refinancing, it’s time to choose a reputable, financially-stable lender offering top-quality home mortgage advice. You may, of course, choose to refinance your mortgage with your current lender; however, it is always a good idea to shop around, compare rates and terms, and request comparative quotes. In doing so, you’ll give yourself room to negotiate a lower, better rate.

Be sure to compare all aspects of refinancing, including points, fees, and all closing costs. This is the only way to get a true picture of your new loan. If a lender offers a rate quote, ask if it is guaranteed. Otherwise, you could find out a month later, when you’re completing your application, that they increased the rate.

Run Your Credit Report

Lenders place tremendous weight on an applicant’s credit. The lower your credit score, the higher your loan's interest rate. Run your credit report to determine if there has been a major change in your score since you applied for your original mortgage. If you see any errors in your report, such as incorrect personal or financial information, request that the credit bureau correct it immediately. Correcting any errors in your report will automatically increase your score, and hopefully lead to a better interest rate on your mortgage.

Understand the Ins and Outs of Closing Costs

When you refinance your mortgage, you must repay closing costs. Carefully review all closing costs and fees with your lender. Before refinancing, be sure to ask the holder of your current mortgage if the mortgage has a prepayment penalty. If it does, you will be charged a fee for refinancing. Applicable fees and upfront costs could wipe out the savings you’d see through refinancing, particularly if your mortgage has high closing costs or a prepayment penalty.