Mortgage Refinancing Tips

Mortgage rates, both for new home purchases and refinancing, are still holding steady at historic low rates. But nothing good lasts forever, so before rates begin to trend upward once again, now is the best time to get started on your home’s refinancing process.

  • Begin by figuring out how much equity you have in your home. To get a general idea of your home’s equity you can check Zillow for a rough estimate or often local Realtors will offer a free non-binding market evaluation. Then simply subtract your mortgage loan balance and the remaining number is a general idea of your home’s equity. The majority of lenders look for at least 20 percent equity for a conventional refinancing loan, though depending on the lender, the equity percentage could be less and still be approved.
  • Next check your credit score. While the more equity you have will help with some credit issues, lenders still want to make sure you are willing and able to pay back the loan. Also, the better your credit score, the lower the loan interest rate. 
  • Then before meeting with a loan officer, consider using an online mortgage refinancing calculator to determine if the entire process is financially feasible. The break-even point, which is the closing costs total divided by the amount of money you anticipate saving each month, needs to be in your favorite and in most cases is dependent on your future housing plans. For example, if you are planning on selling your home in the next five years but it will take eight years to reach your break-even point, then refinancing really doesn’t make much sense. 
  • Consider what type of loan you are interested in in terms of closing costs, interest rates: is an ARM (adjustable rate mortgage) or a loan with a balloon payment a good idea, the length of the loan and will PMI (private mortgage insurance) be required. Your mortgage loan broker should be able to answer these and other financial questions during your first meeting. 
  • Start getting your financial paperwork in order. You’ll need bank statements, W-2s, proof of income if you have other sources including Social Security and child support, your homeowners insurance policy and current mortgage statement, along with whatever else the lender may require. 

With rates so low it also just makes good financial sense to do some comparison shopping. And just like with the mortgage refinancing calculator, you may want to consider checking out an online mortgage rate comparison chart

From appraisals to home inspections, those in the know use Carolina RES for all their real estate service needs. Call us at today at 864-242-1099 or fill out our convenient and safe online form to schedule an appointment.