Before Deciding to Refinance, Ask These 3 Questions
With the changing home loan market, new and attractive deals are coming up. Refinancing is the process of replacing an existing loan with a new loan to get a more competitive interest rate.
There are many benefits of refinancing a mortgage and it may sound like a good idea in theory, but doing it at the wrong time can be risky. Before you take the plunge, you should ask the following three questions:
- Will the refinancing save you money?
When applying for refinancing, there are additional fees and costs attached that borrowers have to pay. The additional refinancing cost includes credit fees, insurance and taxes, appraisal fees, points, escrow and title fees, and lender fees. To make the refinancing worth, make sure that reduction in your monthly payment can overcome the additional refinancing cost. Thus, negotiating a lower interest rate or consolidating debts are not enough, you really need to add up all the refinancing cost to make the refinancing worth.
- What is your credit score?
Know your credit score before refinancing. The credit score is the important factor to consider when refinancing as well as when applying for a home loans Australia. A low credit score can be a roadblock to refinancing a mortgage, as you may not get a better interest rate.
Thus, you’ll need a good credit score to get a better rate and to qualify for all mortgage types. If you have a low credit score then you need to work on building up your credit to secure a good mortgage rate. Before refinancing, make sure you have a good credit history with a credit score of 720 or higher.
- How long will refinancing process take?
After you’ve found the right mortgage, submit the paperwork. Before approving the loan, the lender will verify your assets, income, and other documents. General mistakes in the loan application can reduce the chances of getting the best refinancing deal. For a better understanding of the whole refinancing process, you can consult a loan agent. Make sure the application is absolutely accurate and matching all the requirements of the loan application process.
The above-mentioned questions will allow you to make the best decisions and reach your financial goals.