If you’re considering refinancing your mortgage, you have many choices. However, it’s important to consider what your reasons are before moving forward. First of all, you must be able to qualify for a lower interest rate. In general, the better your credit score, the better your refinance rates will be. If your credit score is less than 740, you may be better off waiting until you have improved it.
Secondly, consider if you’re planning to move within the next few years. While refinancing can result in lower monthly payments, you’ll also have to pay closing costs. In the current interest rate environment, a lower rate may not be enough to offset your closing costs. Therefore, you should calculate the break-even point.
You can use an online mortgage rate comparison tool such as Zillow to compare average interest rates for different types of loans and term lengths. This way, you’ll have an idea of what you can expect from the refinance rate and can compare it with the rate you’re being offered. Despite the fact that Zillow is no longer involved in the mortgage process, it’s a good way to start your research before you start the process.
Aside from saving you money, refinancing can also shorten the length of your mortgage and your payments. It can also make it easier to build equity in your home, and it can even eliminate mortgage insurance. Depending on the type of mortgage you’ve chosen, you could also benefit from a cash-out refinance, which lets you access your home’s equity and access money you may have accumulated.
Refinancing your mortgage is a good option for many homeowners. While it’s important to do your homework before making the decision to refinance, it’s also important to get quotes from three or five lenders and compare them. Once you’ve narrowed down the list of lenders, you should contact the one offering the best rate. Make sure to review the terms of the loan and compare their rates and fees.
Another advantage to a cash-out refinance is that it can give you extra cash to make home improvements or pay off high interest debt. In fact, if you owe $200,000 and have equity of $400,000, you can get cash from refinancing. Moreover, if you have enough equity in your home, you could even refinance for more than your mortgage debt.
The process of refinancing your mortgage is complex and involves many moving parts and confusing terms. Unless you are familiar with the nuances of mortgage loans, you may become frustrated and overwhelmed during the process. Luckily, there are resources to help you through this process. A Consumer’s Guide to Mortgage Refinancing provides helpful worksheets and informative resources to guide you through the process.
Generally, you can refinance your mortgage with as little as five percent equity. However, you can get better rates with refinancing loans that have 20 percent or more equity. If you are looking for lower interest rates, you can look for a home value estimator or a real estate agent. However, you should also consider the costs of closing and other fees when choosing a refinance loan.