Refinancing Your Mortgage Loan: 5 Things to Consider

Refinancing your home loan can save money and provide extra cash flow, and may offer additional benefits depending on individual circumstances and your financial goals. Here are 5 things to consider for determining if refinancing works for you.

• Current low mortgage rates: If you're interested in refinancing strictly for lowering your mortgage rate and monthly payments, this is a great time to do it if you have enough home equity and can save money after deducting closing costs.
• How long you plan to keep your home: A mortgage refinance may not be a good idea if you're planning to move before you can break even on closing costs. Using mortgage calculator tools are helpful for estimating potential savings and comparing mortgage loans.
• The importance of home equity: Home equity is roughly defined as the difference between your mortgage balance(s) and the current value of your home. If you owe $80,000 against a home worth $100,000, you have approximately 20% equity in your home, and your LTV (loan-to-value) ratio is 80%. Conventional lenders typically require a minimum of 20% equity; if your home is worth less than it was when you bought it, you may not qualify for a conventional refinance mortgage. Ask mortgage lenders about FHA mortgage loans, which require less equity and offer flexible approval requirements.
• Your reasons for refinancing: A home refinance can potentially help with meeting overall financial goals including debt consolidation, funding home improvements, lowering your monthly payments. Knowing your goals can help with deciding what type of new mortgage loan can meet your needs.
• Your comfort level: Uncertain times create additional concerns; if you have questions about mortgage refinancing, please consult your financial advisor and also discuss refinancing options with mortgage lenders. Following your instincts can help with avoiding future problems.

Your Refinance Mortgage: Tips for Finding a Good Match

• Shopping mortgage quotes online and using mortgage calculators can help with comparing mortgage quotes and locating affordable mortgage refinance options from the comfort of your home.
• Writing down your questions and concerns assists with staying on track when discussing mortgage loans with potential lenders.
• Mortgage lenders want your business: If you're unsure about or unhappy with any aspect of your mortgage shopping experience, seek out more mortgage lenders.
• Solving financial problems: Refinancing may not be possible if you're having financial problems. Contacting a HUD approved housing counselor can help with resolving financial problems.
• Avoid refinancing for the wrong reasons: Refinancing for funding lifestyle expenditures such as high end vacations and luxury purchases can lead to foreclosure in today's volatile housing markets. Think carefully before using your home as collateral for major splurges.

Understanding your current situation, researching your options, and negotiating your best deal can enhance the benefits of refinancing at today's low rates.