Refinancing Your Mortgage

Filed by admin under Mortgages — 7:24 pm
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If interest rates have dropped and you want to increase your cash flow, reduce your mortgage term, or utilize the equity in your home to consolidate debts, then refinancing your mortgage is an excellent option. Taking the time to find the right mortgage—and the right lender—for your financial needs and goals can ensure that refinancing your mortgage is easy and beneficial.

Determine Your Goals

Decide what you want to accomplish by refinancing your mortgage. Doing so will help determine how you want to refinance—and with whom. For example, if your goal is simply to lower payments, finding lower interest rates and a long term (30 years) may be your only concern. If cashing out equity to consolidate debt is your primary concern, then your focus may be more on immediate or early pay-off—rather than long-term interest rates.

Make Sure Refinancing is Right for You

If your goal is to lower your interest rate and monthly payments, refinancing at a lower interest rate may be a good idea. However, don't forget all of the "incidentals" that go into refinancing. Appraisal fees, closing costs, and early payoff penalties on your existing mortgage may offset monthly savings enough to change your mind. If you plan on moving soon, fronting thousands of dollars in fees to save $100 a month probably isn't worth it. No matter what your goals, sit down with a calculator and determine if refinancing is really in your best interest.

Shop Around

Now that you've decided to refinance, you can begin looking for a mortgage lender. If you're looking for the lowest interest rates, remember that interest rates can fluctuate significantly from bank to bank. In addition, various origination fees, closing costs, and loan terms may contradict with your financial goals.

Check out at least three lenders to ensure that you find the best rates and terms for you. Make sure that you compare similar mortgages so that you can accurately make comparisons between lenders. For example, don't tell one lender that you are looking for a 30-year mortgage and then ask for the rates for a 15-year mortgage from another.

Be Prepared

Don't think that refinancing is any less of a detail-oriented process than obtaining your initial mortgage was. Being prepared will help speed up the loan process and help minimize frustration. Your lender will most likely require the following documentation:

* Current pay stubs for one month
* W-2's for the prior two years
* Bank and investment account statements for the last 2-3 months

Choose a Lender

Now that you've prepared and have found a lender that helps meet your financial goals, let your lender take care of the rest. The groundwork is laid, now it's time to reap the financial benefits of refinancing your mortgage. Saving money on monthly payments, enjoying lower interest rates, and consolidating debt are just a few perks of refinancing your mortgage. Peace of mind, however, is the real payoff.

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