When it’s time to refinance your home, understanding where to start and the exact steps to take can be daunting. If you’re unsure how to refinance your home, it can be tempting to pick the first action plan and end up paying for longer than you need to just to get a lower payment. Going into the process of refinancing fully prepared will keep your confident with what you want and help you make sure that your refinancing fits your goals while staying manageable for your income.
Your goal in refinancing should be to either shorten or maintain the current term of your home loan, while also lowering the rate of your interest. For example, stay you start out with a loan of $200,000 and an fixed rate of 6%, to be paid off over 20 years. The goal of refinancing is to switch out those terms, and come up with something better. For example, the goal of the refinancing would be the same, $200,000 loan, but with a fixed rate of 4% to be paid off over 10 years.
When you get ready to refinance your home, make sure that you know what your credit score is. If your credit score is a little on the low side, you may want to wait to refinance. The better your credit score is, the lower your interest rates will be when you refinance your home.
Before going in, you’ll need to know your home’s current value. Websites like Zillow are perfect for this. For example, you can search the average home value in any county. Take Prince George’s County in Maryland. You can see here the average home value in Prince George’s County. You can do this for any county that you live in. You can see the average rates for other counties, like Anne Arundel County and Baltimore County. This is a good resource, no matter where you live. Once you know your home’s current value, you can start searching for the mortgage rate that will best suite you. You can do this easily online.
Make sure you have all of the necessary documents and paperwork. Even though it can be a time consuming process, you’ll be glad that you put in the effort. Gather up your bank statements, W2s, and check stubs so that you have everything on hand that your lender might need when it comes time to getting your new interest rate.
Remember: refinancing your home can include an array of upfront costs, such as application fees, fees to process documents, and even a charge to run your credit report. Make sure you have the money set aside for the cost of beginning to refinance your home, not just the money you’ll need to start making payments. You’ll also want to make sure you have money set aside for closing costs. Once you’ve decided and settled, you’ll likely need to pay for even more costs at the end of the experience as well.