Have you been thinking about refinancing your mortgage?
It is still a great time to do this as mortgage rates continue to be at reasonable levels.
It is also a good opportunity for home owners who are upside down on their mortgages.
According to Yahoo Finance, “the revised Home Affordable Refinance Program, or HARP 2.0, allows refinances for homeowners who owe more than their homes are worth, regardless of how deeply underwater they are.”
More information on the HARP 2.0 Program can be found here: www.harpprogram.org.
Last year we took advantage of these low interest rates to refinance our mortgage and I am very glad we did it.
Of course, I only recommend taking on a mortgage for no longer than 15 years and only with a fixed interest rate.
So yes, it is a great time for refinancing your mortgage and here are 5 things to consider as you make this move:
1. Should you Refinance?
Of course with the low interest rates, you can save a lot of money on interest and also pay off your mortgage earlier.
However, refinancing only makes financial sense if you intend to stay in the home long enough to recover the closing costs.
For example, let’s say you have a $200K mortgage at 4%. If you get a new mortgage at 3%, you would save $2,000 per year in interest.
If your closing costs are $4,000, you would need to stay in the home 2 years to recover your closing costs.
2. Check your Credit Report.
The first step any mortgage lender will take is to run a credit check.
Any negative or incorrect entries in your report could cause delays in your refinance process.
Take time to check it and take action to resolve any issues.
3. Prepare for A Home Appraisal and Credit.
The mortgage lender will require a full credit report including your FICO scores. You will pay for the cost of this report.
The lender will also require an appraisal of your home. Costs for an appraisal can run between $300-500.
You will be expected to cover this cost as well before the refinance is processed.
Be prepared to share any home improvements you have made since you purchased the house with the appraiser.
4. Prepare your Documentation.
The lender will also require certain information such as W2 statements for the last 2 years, bank statements for all of your accounts for the last 2 months, and payment stubs from your last 2 pay periods.
Be ready to provide these documents quickly to avoid any delays.
5. Communicate
Mortgage lenders are dealing with a large volume of refinance requests due to the low rates.
Stay in contact with your lender to make sure they have all the documentation they need and that the refinance is progressing normally.
Just like with anything else that involves your money, you need to stay on top at all times.
Have you thought about refinancing your mortgage? What has been your experience? What other reminders would you add to the list?
This post is also available in: Spanish
