Because of the high value of a house, a mortgage loan involves a large amount of money. Accordingly, refinancing your mortgage is a big decision to make. It may save you thousands of dollars. Meanwhile, it can force you into a really embarrassing financial situation. Therefore, you must be very careful with this loan. Before plunging into it, ask yourself several questions. The following 5 questions help you to find out whether your plan is a wise one or not.
1. How much the fees will cost me?
All mortgages ask for fees, but the amount of fees is different. Sometimes the gap is large between two lending institutions, so it is vital for you to check out the cost of fees before applying for a new mortgage. You can pay mortgage fees in advance. Still, there is another option. You can choose to add them into the total amount of your loan. Consequently, the new mortgage comes with extra interest.
2. Must I reevaluate the house?
A house appraisal costs a lot. Unless it is necessary, you should not spend money on it. If you are confident about your home equity and the house appreciation, then do not hesitate to appraise your house. But if you are uncertain about these aspects, you had better reconsider your decision. You may lose both the fee for appraisal and the chance of obtaining a remortgage.
3. Is it possible to get a good rate?
You may get a general idea about interest rates from relevant websites, newspapers and magazines. But you must know the specific number of the refinancing you are going to have. Many factors together, including your credit score and the type of refinancing, determine your interest rate. Thus make sure that you have taken every detail into consideration.
4. Am I eligible for the refinancing?
You must have learned about the requirement of house appreciation in mortgage refinancing. After all, it’s the most rudimentary knowledge in the loan. But do you know other standards that you have to meet? Many lenders require that a high credit score is necessary. Some ask you to hand in the documentation of your financial situation.
5. Does the new mortgage save my money?
People refinance their houses for various purposes. Yet the main aim is to save money. The interest rate and the life of the new mortgage differ from the old one in most cases. So you should take both the two factors into calculation. Ignore the lender’s rhetoric; grasp the essential information. At least you have to prevent turning from a good loan to a bad one.