Is Refinancing Right for Me?
Have you been considering refinancing your home? In some cases, this could save a significant amount of money over the life of your loan. However, in some cases, it could actually not be worth it. As the best title company at the Lake of the Ozarks, Arrowhead Title knows how the process works and we have a few tips on how to tell if a home refinance is right for you and what to do if you decide to take the plunge. Read on to learn more!
Something that typically prompts individuals to consider refinancing is when they see that the rates have started to drop from where they were when they first purchased their home. Before you get on the phone with your lender, consider the true difference between the new rates and your current rate. It is standardly recommended that you wait to refinance until the difference between those two rates is at least 2%. Some experts say, however, that a 1% gap could make a big enough difference in the long-term to be beneficial. However, if your rate is only a couple of points higher than the new rates, it could be beneficial to wait. The application process, fees incurred, hard credit check, and other parts of the process could not be worth going through the refinancing process for just a few points.
What you can do is have everything prepared. If rates are trending down, get all of your paperwork and application materials in order. That way, when rates do drop to an amount that is worth it, you will be ready and able to take advantage of them. These documents include bank statements, pay stubs, federal tax returns, retirement account statements, other sources of income, your homeowner's insurance policy, and the current payoff amount of your mortgage.
This seemingly magic number is very important when it comes to getting a loan or even a cell phone plan these days. It is also very important for the refinancing process. Lenders will not go off of a previous credit score; they will complete a fresh check to see if you are still creditworthy. If your score has dropped significantly from paying for home repairs, buying new furniture, or purchasing a vehicle, refinancing may not be the right choice for you until your debt-to-income ratio re-balances.
If your score has lowered, there are ways you can help improve it. Stay on top of all your payments and bills and put extra toward your credit cards and loans if possible to reduce the percentage of your credit limit that you are using. It is also very important to regularly check for errors on your credit report. Every now and then, someone else's information may get attached to your account, or someone may have stolen your identity and taken out a bunch of credit card applications. Make sure everything in your file is actually yours by regularly ordering your free credit reports. If you are considering refinancing, it is also advisable to not make any major purchases in the meantime. Applying for another large amount of credit shortly before refinancing is seen as a red flag and your application could be denied.
As you consider refinancing your home, take a look at what it would take to refinance with a shorter-term mortgage. Often the rates for a 15-year mortgage are quite a bit lower than those for 30-year mortgages. If you can afford the monthly payment, then refinancing to a 15-year mortgage could be highly beneficial over the length of the loan, possibly saving you thousands in interest over time.
If you decide to move forward with refinancing, be aware that another home appraisal will be performed on your house. If it appraises for lower than the mortgage amount, you may have to make a large payment to the lender to make up the difference. Take a look around your home and neighborhood to identify any issues that may have arisen during your ownership so far that may reduce the value. If you want to make extra sure that there are no surprises, hire your own appraiser to take a look and give you a value estimate.
Refinancing is a big decision that should be considered carefully. As the best title company at the Lake of the Ozarks, Arrowhead Title has significant experience in real estate transactions. The last thing we would want for you and your family is to try refinancing and end up struggling to make payments on a shorter-term loan, or getting denied and receiving bad marks on your credit. If you aren't sure whether a refinance is right for you, consider the current rates against your own, review your credit score, calculate what your new payment would be, and consider the value of your home. As always, for any of your title insurance or escrow service needs, Arrowhead Title is here for you!
The Lake of the Ozarks' Most Trusted Title Company
750 Bagnell Dam Blvd Suite B
Lake Ozark, MO 65049
Mortgage Rates
Something that typically prompts individuals to consider refinancing is when they see that the rates have started to drop from where they were when they first purchased their home. Before you get on the phone with your lender, consider the true difference between the new rates and your current rate. It is standardly recommended that you wait to refinance until the difference between those two rates is at least 2%. Some experts say, however, that a 1% gap could make a big enough difference in the long-term to be beneficial. However, if your rate is only a couple of points higher than the new rates, it could be beneficial to wait. The application process, fees incurred, hard credit check, and other parts of the process could not be worth going through the refinancing process for just a few points.
What you can do is have everything prepared. If rates are trending down, get all of your paperwork and application materials in order. That way, when rates do drop to an amount that is worth it, you will be ready and able to take advantage of them. These documents include bank statements, pay stubs, federal tax returns, retirement account statements, other sources of income, your homeowner's insurance policy, and the current payoff amount of your mortgage.
Credit Score
This seemingly magic number is very important when it comes to getting a loan or even a cell phone plan these days. It is also very important for the refinancing process. Lenders will not go off of a previous credit score; they will complete a fresh check to see if you are still creditworthy. If your score has dropped significantly from paying for home repairs, buying new furniture, or purchasing a vehicle, refinancing may not be the right choice for you until your debt-to-income ratio re-balances.
If your score has lowered, there are ways you can help improve it. Stay on top of all your payments and bills and put extra toward your credit cards and loans if possible to reduce the percentage of your credit limit that you are using. It is also very important to regularly check for errors on your credit report. Every now and then, someone else's information may get attached to your account, or someone may have stolen your identity and taken out a bunch of credit card applications. Make sure everything in your file is actually yours by regularly ordering your free credit reports. If you are considering refinancing, it is also advisable to not make any major purchases in the meantime. Applying for another large amount of credit shortly before refinancing is seen as a red flag and your application could be denied.
Shorter-Term Loan
As you consider refinancing your home, take a look at what it would take to refinance with a shorter-term mortgage. Often the rates for a 15-year mortgage are quite a bit lower than those for 30-year mortgages. If you can afford the monthly payment, then refinancing to a 15-year mortgage could be highly beneficial over the length of the loan, possibly saving you thousands in interest over time.
Home Value
If you decide to move forward with refinancing, be aware that another home appraisal will be performed on your house. If it appraises for lower than the mortgage amount, you may have to make a large payment to the lender to make up the difference. Take a look around your home and neighborhood to identify any issues that may have arisen during your ownership so far that may reduce the value. If you want to make extra sure that there are no surprises, hire your own appraiser to take a look and give you a value estimate.
Your Home Refinance
Refinancing is a big decision that should be considered carefully. As the best title company at the Lake of the Ozarks, Arrowhead Title has significant experience in real estate transactions. The last thing we would want for you and your family is to try refinancing and end up struggling to make payments on a shorter-term loan, or getting denied and receiving bad marks on your credit. If you aren't sure whether a refinance is right for you, consider the current rates against your own, review your credit score, calculate what your new payment would be, and consider the value of your home. As always, for any of your title insurance or escrow service needs, Arrowhead Title is here for you!
The Lake of the Ozarks' Most Trusted Title Company
Where Accuracy Matters!
750 Bagnell Dam Blvd Suite B
Lake Ozark, MO 65049
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