- Determine your goal
Make sure you are refinancing for the right reason. (Ex. Look to lower your interest rate, while maintaining or shortening the life of your loan.) Be sure to take into account how much you have already paid on your current loan. While refinancin for another 30 years, to obtain the low monthly payment might sound desirable, you will end up paying more in interest than necessary.
Ask yourself, will the savings be enough to make refinancing worth while?
2. Obtain your current credit score
Has your credit score and payment history improved since you first purchased your home? If so, you might qualify for a lower interest rate by simply having kept up on your mortgage payments.
On the other hand, if you’ve maybe experienced some rough patches in life since purchasing your home, maybe you missed a few student loan payments, or maybe you had to purchase a new car. These are all things to take into consideration when deciding if a refinance is right for you.
3. Research your home’s current value
The best way to obtain the correct value of your home is through your trusted local real estate agent. These are professional individuals who view and price hundreds of homes a month. Not only will they inform you of your home’s current market value, they can also provide insight on whether selling is a better option.
4. Shop for the best mortgage rate
Make sure you weigh all of your options. Check with local banks and lenders in the area to assure that you are receiving the lowest rate possible.
Be sure to lock your rate in once you have selected the best rate for you and your family. Also, if you are planning on moving in the next couple years, refinancing probably isn’t the move for you. Stay put, and continue building that equity. Remember that interest rates are front loaded, meaning you pay the highest portion of interest on the first years of your loan. If you purchased your home 10+ years ago, keeping your original loan might be the best option for you.