4 Smart Questions To Ask Before Refinancing Your Mortgage

1) Do I Have Enough Equity To Get A Mortgage?

Equity is the difference between what your home is currently worth and what you owe on it.  A Home worth $250,000 and you have a mortgage for $225,000 means you have $25,000 in equity.  It also means that will need a loan for approx. 90% LTV (loan to value).

If you have equity, that’s 1 step toward being able to qualify for a refinance.  BUT…even if you do not…even if you owe more on your home than what it is worth there are 4 programs that will enable you to take advantage of today’s low rates REGARDLESS of your equity situation.  Contact me for more info.

2) How’s My Credit?

Most lenders will look at your credit score as a part of determining whether or not to make you a loan. With most lenders, your rate will depend on your score and the higher it is, the lower your payment will be.

Generally, 620 credit scores are the lowest that will qualify you for any loan.

3) What Do I Want To Accomplish?

Mortgages typically offer a choice as to their term. While the 30-year loan is the most popular, shorter term mortgages save you money since you pay less interest over their lives. They also get you out of debt sooner, at least as regards your house.

The drawback is that they carry higher payments since you pay off more principal every month. This can make them less affordable for some borrowers.

4) How’s My Current Loan?

If you have an adjustable rate mortgage, you may want to switch to a fixed rate mortgage simply for the additional security it offers you. On the other hand, if you are planning to move relatively soon, your current mortgage could be a better deal whether it’s fixed- or adjustable-rate.

When trying to decide what to do, compare the cost of refinancing with what it would cost you in additional interest to hold on to your existing loan. While the breakdown is different for every borrower, generally, you’ll need to keep your current house and loan for anywhere from 18 months to 2 years to break even on the costs of refinancing.

Deciding what to do with your mortgage can be complicated. Working with a qualified loan broker that can consider every angle with you can help you to make a better decision.

Neil Coleman

Licensed Mortgage Professional

NMLS # 143306

Office: 708.349.7467

Serving Illinois, Indiana, Wisconsin, Iowa, Michigan, Florida, California, Colorado, Arizona, Utah