What is Refinancing?
When you refinance a home or car, you are simply exchanging one loan for another with a better rate. After adding value to the home though home improvement projects, you can qualify for a better loan rate. As your credit score improves with time, you may be eligible to refinance your home with a fixed rate mortgage that will save you money on your monthly payments. Timing and research are essential to getting the best rate on your refinance loan.
The obvious reason to refinance a home is to save money. Locking down a fixed rate mortgage will save you big time if rates go up in the future. Especially for young people who purchased a home with little or no down payment, they will be paying private mortgage insurance. Once you have lived in the home for at least 12 months, you will be eligible to refinance and eliminate the need for private insurance. Again, only refinance if you plan to live in the home for years.
Steps to Refinancing
First, know how much your home is worth. Ask real estate agents working in your area, or use Zillow to find out the value of your home. You can also get it appraised. Once you’ve done this, calculate what percentage of the home’s value you owe on a mortgage. If it’s more than 90 percent, you may qualify for special programs. If it’s less, you may qualify for a refinancing loan. Call a loan officer of your choice and discuss your options.