Refinancing refers to the process of paying out your current home loan, either with your existing lender or through a different lender. You can get a lower interest rate and reduce your monthly repayments or you could fix your rate for certain period and have the security of fixed monthly repayments. If you would like to refinance your loan, below is a step-by-step guide.
Step 1: Determine your goal. You want to refinance for the right reason. Make sure that this reason is crystal clear – whether you’re intending to refinance to get a better rate, or to access equity. Step one is pretty simple but it is extremely important. Like anything, start with the end in mind and make sure that you determine your goal.
Step 2: Know your credit score. In this day and age, this can really be simple. There are a number of providers who can provide you with your credit score, however I personally use Equifax. In this step, be realistic with yourself on where you’re at. If you don’t have the best credit score, at least know where you’re at so you know what you’re working with.
Step 3: Know your home’s value. In the same way as knowing your credit score, you need to know your home’s value. Again, just like step one, you don’t need to make this too complicated but look at what you bought it for; look at various websites to find what they’ve estimated it at. Why is this step important? Really, it’s important in taking into consideration especially when banks are looking at refinancing your home.
Want to get an indication of your home’s value? We can provide a valuation estimate, simply get in touch with us.
Step 4: Know your “all-in” cost. Ideally, you want to know the costs that can go along with your refinancing – from application fees to the cost of a valuation. Just before you just jump in blindly, make sure you ask your lender about your all-in costs so you know what type of money to expect out of your pocket, and for them to be upfront as well so you know whether you are getting a fair deal of what not.
Step 5: Know whether to lock in your rate. This is the most important step. Obviously, there might be some reasons for a variable rate mortgage and for some people fixed rate will make sense. Know which option – or combination or options – will be most appropriate for you and your family.
Make sure that you’re getting the best rate. Keep in mind that when you’re refinancing, it’s just like re-closing on your home. When you close your home, you get your closing costs, depending on what state you live in. It can be a large number so similar to step four above, know your closing costs and your fees because you will want to have some cash on-hand before that.
Whether you’re looking for flexibility, a lower interest rate or to consolidate your debts, refinancing could help you achieve your goal. As everyone has different needs and objectives, be sure to consult with your trusted professional who can give you advice on your particular situation. If you don’t have anyone on your team at the moment, feel free to contact us.