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Best Ways to Prepare for Refinancing Your Home Mortgage

Homeowners can realize significant savings each month when they refinance their mortgage loan to one with a lower interest rate. But how much a homeowner can save depends on the size of the mortgage loan and the amount of interest you can shave off. Before you refinance your home mortgage it’s important to remember refinancing isn’t always simple and it isn’t free. That’s why doing some research before you begin the process so you don’t wind up spending a lot of money to save a little.

As you prepare to refinance your home mortgage it’s a good idea to prepare yourself for what to expect. Determining the current average interest rate on the mortgage loan you’re seeking is a good way to start. Interest rates fluctuate almost daily and vary among loan products, with lower rates available for 15-year fixed-rate mortgages than rates for 30-year fixed-rate mortgages.

You can determine how much money you might save each month refinancing by comparing today’s interest rates with the rate on your existing mortgage. This is easily done with online mortgage calculators. Simply enter your loan amount, existing interest rate and your potential new rate to see how much money you could save. If your monthly savings would be enough to justify the cost of refinancing, it’s time to call Homestead. Though closing costs can range between 3% and 6%, in many cases your monthly savings is enough to let you recoup this cost in a relatively short period of time.

Before beginning the refinancing process, many homeowners hire an appraiser to help them determine the current market value of their home. An appraiser’s findings will show lenders whether or not you have at least 20% equity in your home and if your home’s value has increased or dropped since you bought it. The average charge for an appraiser is $400. In many cases homeowners also work with realtors who help them to access a list of recently sold properties. This allows the homeowner to provide the appraiser with a list of recently sold properties they believe best compare to their home. It also helps to provide the appraiser with any knowledge about recently sold properties. For example one home may have sold for $100,000 less than your home four months ago with the new buyer fixing up the property. This is important information to provide your appraiser because it can impact the value they assess for your home. Homeowners should also provide appraisers with any changes or additions made to the home since you purchased it. Putting in a new kitchen will add to its value while painting a room won’t affect its value. By being prepared for your appraiser you’re more likely to get full value for your home.

It’s important for homeowners interested in refinancing to know their monthly debt obligations as they are more likely to be approved for refinancing when their monthly debt obligations, including their new mortgage payment, is less than 28% of their gross monthly income. Be sure to make copies of financial documents proving your gross monthly income and debt obligations for yourself before sending them to your lender. This will be a helpful resource for you to refer to throughout the process.

Doing some research before you begin the process of refinancing your home mortgage helps you to better gauge what to expect. A little research goes a long way.