Refinancing Your Home Loan

Refinancing your home loan can solve a lot of different mortgage problems and give you better, more affordable payments. If you’re not sure about the refinancing procedure, take a look at the following steps so that you can get familiar with them and feel comfortable about applying for a refinance loan.

Here are the necessary steps you should take when you are considering refinancing your home loan.

1. Examine why you you want a refinance your home loan– There are a lot of different reasons why homeowners consider refinancing their home loan. In most cases they are looking for payment relief by qualifying for a lower interest rate. Interest-only and adjustable-rate loans often give a low rate of interest for the first years, but these rates usually increase later, which causes mortgage payments to rise. Refinancing is often considered to avoid payment jumps, and eventually foreclosures.

2. Qualifying for the home loan– The first thing a lender is going to do is look at your credit score. Just because you have a mortgage now and have kept up on all the payments does not mean that your credit history is in good shape. You should take a look at your credit score before applying for a refinance loan to make sure that it is still good and that nothing has been reported. You will need to fix a credit score that is lower than 680, in most cases, while a score that is 740 or more will give you the best interest rates. The ability to refinance will also be based on how much is still owing on the home and the value of it. The lender will look at the ratio of the loan-to-value and will want this ratio to be lower than 80%. Special provisions are made for homeowners that have a high LTV ratio.

3. Provide the necessary documents- All the information that you provide on your application form will need to be verified first with the bank or mortgage lending institution. You will need to provide supporting documents for your income, assets, liabilities and employment. You will be asked for recent tax statements and paycheck stubs. You may also have to provide bank account information.

4. Filling out the home loan application- Shop around to find the best refinance rate if this is the step you feel is the best to make. You can take a look online to do some comparison shopping between rates and also call up some smaller credit unions and banks that may not appear on the Internet. You will want to find the best rate possible, so it is worth the time to shop around for the best deal. These are the steps you need to take if you are refinancing a mortgage loan.

Take the time to really examine the costs involved, the benefits and the losses before making a final decision. Ultimately, you will be responsible for this choice and will have to make the final decision based on what is best for your financial future.