One of the best benefits of mortgage refinancing is the ability to take advantage of low rates so that you can lower your monthly repayments. But not everyone is fit for it. Successful refinancing comes only to those who are prepared enough for it. Before you refinance your mortgage, you have to do the following tasks to make sure you won’t lose money in the long run.
• Pay off all your late payments. Although you can avail of mortgage refinance loans as often as you want, many lenders allow switching to a new loan after you have paid off your late payments for the past year.
• Make sure the mortgage refinance rates are low before you refinance a loan. To find the rate that fits your budget, it is best that you compare the refinance rates of various mortgage lenders. Check the mortgage refinance rates and choose one that is 2 percent lower than the rate on your existing loan. In doing so, you maximize your interest savings over the duration of your new mortgage loan. The money you will save on the interest can be used to recover the cost you incurred for the new loan. But this applies only when you stay in the house for a break-even period.
• Review your credit report and improve your credit score. Request for a copy of your credit report from the bureaus and check it for any inaccurate data. For example, there may be some errors on your late payments, and you can have them corrected. Dispute the incorrect details and ask the bureau to eliminate them from your credit report. Also, take note of your unpaid debts and pay them off as soon as you can. Failure to improve your credit score hinders you from getting a low interest rate. You may not also even qualify for a mortgage refinance loan if you have a poor credit score. Although refinance loans are available for people with poor credit score, they can be quite difficult to manage because of their higher closing costs and interest rates.
• Build up enough equity on your property. You can get a refinance loan if you have a minimum of 10 percent equity on your home. If your equity is lower than 5 percent, you can still qualify for a mortgage refinance loan. However, you will be required to pay a certain amount, which is the difference in the minimum equity.
Mortgage refinancing is a great way to save on your mortgage interest and ease your burden when it comes to monthly repayments. Just follow the tips discussed above and you are on your way to refinancing a new loan and achieving your mortgage goals.