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If you’re a homeowner thinking about refinancing your existing mortgage, now remains a good time to do so. While interest rates continue to rise, they remain lower than they were a decade ago, providing you with the opportunity to refinance and lower your monthly mortgage payments.
Getting a better interest rate to lower your monthly payments remains among the top reasons to refinance. But getting that lower rate depends on several factors such as your financial situation, credit score and the lender you’ve selected for your refinance.
Keep in mind refinancing for a mortgage comes with all the same processes and fees you experienced when you first got your home loan, such as paying for a home appraisal, title insurance, inspection, document recording, etc.
When searching for the right lender, be sure you do your homework and get estimates of the cost of every item. Some lenders tout a low rate to get you in the door but charge higher escrow and processing costs than others. They know once you’ve committed time and effort to a lender, it will be difficult (but not impossible) for you to walk away from the process.
If you want to refi, follow these steps:
Check your credit report
Before talking to a lender, it’s wise to check your credit report several months before to be sure that there are no issues that would negatively impact the interest rate you receive from your lender. If there are issues, you’ll have time to clear them up before you apply for your home refinance.
Get prequalified for a home loan
Once you’re ready, stop by your local credit union and get pre-qualified for a home refinance loan. A prequalification will let you know how you are able to borrow, what programs are available to you and what interest rates you qualify for.
Do the math
With preliminary numbers in hand, you’ll know if refinancing makes financial sense for your situation. A home refinance typically means a new 30-year loan, so you’ll need to compare that with the monthly savings you’ll have with your new rate to see if it works for you.