Conventional mortgage terms usually span 20 to 30 years. Besides the specificity of a time frame, many circumstances can change during that time. Mortgage rates constantly fluctuate, so they may drop several percentage points a few years after you sign your mortgage. Over the years, you could gain a promotion at work, leading to a higher salary, better credit score, and lower debt-to-income (DTI) ratio. For these reasons, refinancing your mortgage makes sense if you tick all of these boxes and more.
Benefits to Refinancing Your Mortgage
Refinancing your mortgage requires you to pay off the existing loan and replace it with a new one with a shorter term or better rates. Many homeowners refinance because of the following:
- Lower monthly payments and interest rates
- Reduce mortgage term by several years
- Stop paying for mortgage insurance
- Switch to an adjustable-rate mortgage to a fixed-rate mortgage (or vice versa)
- Debt consolidation
- Cash-out option
- A less stressful financial situation
If you think refinancing your mortgage is for you, here are five simple tips that will save you time and money:
- Request a Credit Report. Your current credit score is one of the key factors for your refinance approval. If you feel that your finances are in better shape now compared to when you signed your mortgage, your credit report will show you these numbers in stark terms.You can request a credit report through many avenues. Jared Lincoln of Mortage City quoted “Check the report for any errors, including your personal information, debts over seven years old, and accounts closed by the lender. Make sure every line item is accurate before you apply for a refinance appraisal.”
- Prepare Your Documents. Mortgage lenders require thorough financial documentation from refinancing applicants. If you are refinancing with your spouse or another family member, you should submit documents for both of you. You will need at least a full tax return, recent bank statements, and pay stubs. If your lender asks for additional information, respond as quickly as possible so your refinance process will remain on schedule.
- Shop Around. Just as you should have compared multiple lenders when you first applied for a mortgage, the same is necessary for your refinance. Additionally, you don’t have to refinance with your original lender for better rates. Do your due diligence regarding other trustworthy lenders in your area, and ask about their mortgage refinance rates and fees to make a cost-effective decision.
- Prepare for Closing Costs. Refinancing your mortgage involves closing costs too, usually ranging between 2% to 3% of your loan value. The final amount depends mainly on where you live and current market rates. Closing expenses include fees for the application, inspection, appraisal, title search, and of course, attorneys’ fees. The most cost-effective way to cover closing costs is to pay for them upfront.
- Ace Your Appraisal. Most lenders require a property appraisal before you close your refinance. A higher home value means more financial benefits, so you should set yourself up for success. You can impress your appraiser with simple improvements to your curb appeal and interiors. Make sure to give them a list of the permanent upgrades you’ve made to increase your home value.
Refinancing with Mortgage City
Mortgage refinance is an excellent option for many owners who are several years into paying off their loan. These simple, cost-effective tips will help make the process go by much more smoothly and will surely save you a lot of time and money.
If you’re looking for mortgage brokers in Michigan then Mortgage City is the best choice for you. We can help you save time and money by refinancing your home loan. Schedule a consultation with our loan experts and get a free home refinance analysis today (248) 930-8709!