Before you make any important financial decision, you should always do your research. Refinancing your home mortgage is no different. Take the time to find out all you can so you can determine whether it's the right option for you.
Learn what the loan entails.
Here's what refinancing your mortgage really means: you're taking out a new mortgage to pay off the current one. The main reason people do it is to take advantage of a lower mortgage interest rate. But refinancing comes with longer terms, meaning that it will take you more time to pay it off. Some say the benefit of paying less each month with a refinanced mortgage is worth the extension because they can use the money they save to buy a new car, make much-needed home improvements, afford college tuition or pay off another loan to reduce their debt load.
Check your credit score.
One thing that can affect your chances of qualifying for a mortgage refinance is your credit score. This figure gives a mortgage lender a good indication about your ability to repay the new loan. You should review your most recent credit reports to determine if there is need for improvement.
Several factors can affect people's credit scores. Some reasons are significant, such as a large student loan, while others can seem miniscule, like an unpaid library fee. No matter what, they can lower your score, if they're not addressed.
Pay attention to interest rates.
Obtaining a lower interest rate is one of the main reasons why refinancing a home mortgage is so appealing. But you'll have to do your due diligence to get the best deal. Be sure to compare the rates other mortgage reginance lenders are offering with what you're currently paying. The difference could surprise you.