Determine the Right Time to Apply for Mortgage Refinancing
Homeowners who can not keep up anymore with their mortgages should consider refinancing
. This loan is a long term commitment but it offers good benefits for borrowers. If you are applying for refinancing, the benefits should be greater than the cost of the loan.
Equity Is Important when You Refinance
You should have enough equity on the property so you can refinance your mortgage. Before, it is easier to get an approval for loan refinancing even if you do not have substantial equity. The equity requirement may vary from lender to lender. But the common benchmark being followed today is between 5 percent and 10 percent equity. If you have less equity, then you will be required to pay some money in order to increase your equity level.
Consider the 2-points Cap Rule
You have to consider if there is at least a cap of two points. This is an ideal rule of thumb that may guide you when getting a mortgage refinance. If the interest rate of your loan is at least 2 percentage points higher than the existing rates in the market, then it is practical to quickly refinance your current mortgage. The difference on the interest rate is the amount of money needed to cover the cost of refinancing the mortgage. You may also get no-cost loans or low cost loans from some lenders. This is done by bundling the cost of refinance in your interest rate. If you choose this type of loan, then your interest rate will be higher.
Shop Around for Different Lenders
Get at least 5 different quotes from different lenders. You have to remember that not all lenders are offering the same refinance costs and interest rates. The rates usually fluctuate and follow market trends. Lenders consider these market factors in determining their rates. Do not believe the myth that lenders are giving similar rates and costs. Get as many quotes from different lenders in order to find the best deal.
Keep Current on Your Mortgage Payments
You can not obtain loan refinancing if you are not current on your payments. You must not have any late payment for the past 12 months. This is the usual requirement of lenders before they entertain your loan application. So make sure to follow your payment plan in order to easily obtain mortgage refinancing.
Always Prepare for Mortgage Refinancing
The rates that you can obtain from a refinanced loan primarily depend on your credit score. It is important therefore to get your credit score from the three credit reporting bureaus. You have to check if there are errors in your report. Make sure to contest any error so that appropriate rectification can be made. You must also avoid getting new credit prior to your application for mortgage refinancing. It is also wise to pay down your debts to keep your accounts clean.
When applying for mortgage refinance, make sure that you have good credit scores to get lower interest rates. You also need to consider the existing market rates to know when to apply for refinancing. Consider these two factors so that you can obtain better deals from lenders.
Determine the Right Time to Apply for Mortgage Refinancing
By: Rob Blake
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