The Interest rates on mortgages are lower than they have been in a long time and when this happens historically there is a rush to refinance. A check of resent numbers from mortgage bankers reveals that this trend is starting and increasing even though rates have slightly increase in the pass weeks. Some home owners are really benefiting from the interest rates by refinancing but all home owners are not jumping on the bandwagon. Let’s look at some things you will need to know before you decide to refinance;
1. You Will Need To Know Your Credit Rating
If your credit rating is less than stellar or it is average you may not qualify for the best rates. Home owners that do not have a high credit scores will be able to refinance it is just that there may be no benefit in it if they cannot knock off at least 2 points from their current interest rate. Another thing to consider if you do not have the best credit rating is fees that the lender may tact on to make the loan work for the bank. This may take away from any benefit gained by refinancing.
2. You Will Need To Know Your Equity
Your home may not have enough equity to refinance. With home prices either stagnant or slipping these pass two years many homes just do not have the amount of equity needed to refinance and some are even upside down in their loans. Upside down is when you owe more money on a home then it is worth. These types of properties are definitely not going to cut it at the bank. You will need somewhere in the range of 4% equity for a mortgage lender to refinance your loan.
3. You Will Need To Know Your Prepayment Penalties
Another thing you need to know when refinancing is how much and if there is a prepayment fee on your current loan. Prepayment penalties are designed to discourage refinancing and it may be for some. Factoring in what is mentioned above after calculating a prepayment penalties it may just be wise to keep your current mortgage.
4. You Will Need To Know Your Income
Your income could also be a factor in getting approved and you should know before you began that your lender will be evaluating your ability to repay the refinancing mortgage. With the fluctuating economy what you were making the first or second time around may not be enough. Many banks have change their policies and the days of easy mortgages are gone for now.
5. You Will Need To Know It’s Tougher Now
Just because the banks have toughen up their loan policies does not mean you should take no as an answer. This time around you may have to work harder to get refinancing when it was a lot easy just a few years back
So, before you refinance consider the above and be aware before you start. Good Luck!