The reasons to refinance are many: you could potentially lower your monthly payment, consolidate debt, obtain cash for home improvements, or gain equity more quickly. Benefits aside, though, the refinancing process can be intimidating. How do you achieve your goals while incurring the least expense? Apex lends three tips to help.
Get an Idea of Your Home's Value
Getting an idea of your home’s value is critical – especially considering how much home prices have risen in recent years. Tools like Zestimate, U.S. News’ HomeLight valuation tool, Redfin, and eppraisal.com are useful for a ballpark figure in this endeavor. Once you have a better idea of your home’s value, you are better positioned to reduce your mortgage expense. For example, if your home’s value has appreciated and you had nearly 20 percent equity in your property, that jump could put you over the edge for removing private mortgage insurance premiums during your refinance transaction.
Most homeowners who refinance must first get an appraisal, an independent assessment of the value of their home that is ordered by a lender once the loan is in process. Appraisals are the most reputable assessment of home value. Since a higher appraisal means that a homeowner’s equity is more valuable, positioning your home to appraise well is critical. Since appraisers typically evaluate a home in person, consider painting your home, decluttering, and highlighting less visible features that could benefit you.
Credit is crucial when applying for any type of loan, especially a mortgage. Get your credit score from annualcreditreport.com –an official, government-authorized site – and report any errors on the document. Since your credit score is the single largest determinant in your interest rate, consult with your mortgage banker if you feel yours could be improved to weigh a rapid-rescore. Read our recent blog to learn what else you should know about your credit score.
Armed with these three tips, we hope you feel more prepared to refinance! Looking for more refinancing basics? Read our fundamentals series, Refinancing, Simplified, or check out our recent Refinancing Recommendations series that dives into the benefits of different loan terms.