When the time comes to refinance your mortgage, you will probably want to make it as painless as possible. It is only natural to simply contact your current mortgage holder and accept one of the many offers made to you by email and direct mail. However, to get the most savings and make the whole process interesting, you need to add five key points to your to-do list.
1. Know what you need to do
Before activating mortgage refinancing, review the balance and conditions of your current loan. This way you can determine how much you are likely to save by taking into account current refinancing rates, paying with your current lender, and the costs and closing costs you incur.
You can also get an idea of your best possible savings scenario and the minimum acceptable credit terms you want to negotiate.
2. Check your credit score
If your credit rating has improved significantly since taking out your current mortgage, you may be pleasantly surprised. A higher credit rating can lower the mortgage rate.
Check your creditworthiness for accuracy by getting a free report from AnnualCreditReport.com, the official website created under federal law, and guarantees free reports to consumers. Then buy your current credit rating from one of the three major credit bureaus. There are many variations of the popular FICO score. Remember to find out about the most commonly used by mortgage lenders.
Many banks and credit card companies offer their customers free credit scores. These can be helpful, but you may not get the most relevant score for a mortgage application. Surveys by the Office for Financial Consumer Protection have shown that different rating models can change the credit quality category for almost a quarter of consumers. (For example, from “good” to “average”).
3. Freeze new debt.
If everything fits well with your credit rating, block your scores by resisting the urge to make additional purchases by credit card or open new credit accounts. In any case, get the money back and pay all the debts you can. Protecting your credit rating can be essential to maximize your savings when refinancing your mortgage.
4. Buy at least 3 mortgages refinance lenders
Research shows that borrowers get the greatest savings if they buy at least three lenders. In a recent study, CFPB found that 48% of consumers consider a single lender when looking for a mortgage and can lose thousands of dollars in savings bypassing a low-interest mortgage lender.
5.Evaluate your mortgage refinancing strategy
Your current home loan may be an adjustable-rate mortgage and you think interest rates will surely go up. Or you have a fixed-rate loan with a higher interest rate and you think that an ARM with a lower interest rate is the way to go.
Depending on your situation, including short and long term housing needs, it may be time to rethink your mortgage refinancing strategy. If you carefully consider different scenarios, you may find that a different type of mortgage better suits your needs and saves you money.