Deciding to refinance your home is a big and
often beneficial decision. But is it the right choice for you?
You’ll know that you’re ready to hit the closing table again after
- Make the correct comparison.
When checking out refi rates, be sure to compare the annual
percentage rate, or APR, of each loan instead of
the quoted interest rate. You must examine the true cost of your
loan and compare it to your existing APR to determine whether or
not you will save at least a half a point on your new loan.
- Get an appraisal. Fannie Mae
and Freddie Mac are cracking down — borrowers with a high
loan-to-value ratio can expect to pay extra fees. Therefore, it’s
smart to get your home appraisal performed beforehand so you
don’t waste time and energy applying for a refi on a property
that’s worth less than you had anticipated.
- Choose the right loan. When
looking for a new loan, be sure to weigh all of your options
and choose a product that’s right for you. If, for instance, you
want to refinance but believe that your job is in jeopardy, you may
choose to reduce your payments, even if it means extending the life
of your loan.
- Shop around. Buyers
typically compare loan offers from multiple lenders. But many don’t
realize that they can actually shop around for title services, too.
This can translate into hundreds or even thousands of dollars in
savings on your loan. Experts recommend checking at least three
lenders and three title companies before making your decision.
- Decide to stay put. Selling
your home right after a refi is practically a surefire way to lose
money. Therefore, you should plan on staying in your house for a
while after you refinance. It’s a good idea to decide how long you
plan to remain in your home and then run the numbers to determine
your break-even point — the point at which your savings outweigh
your refinancing costs — before jumping into a refi.
- Stay on top of your credit.
A credit rating below 660 can derail your mortgage refinance. Steps
to improve and maintain your credit score include paying your bills
on time, keeping all of your credit lines open and paying down any
cards that are at their max.