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Millions of people have refinanced their homes over the past couple years during the housing crisis. We were one of those people. We started out with an interest only mortgage to save us money while my wife finished college. As soon as she graduated and found a job we started looking to refinance. We waited for the interest rates to get as low as we thought they would go, and we acted. The result was a 30 year fixed rate mortgage at a great rate. The majority of people have been switching from adjustable rate mortgages to fixed rate. If you haven't refinanced yet, and are stuck in a loan you don't like, you'd be crazy not to refinance right now. Here are some tips to think about when refinancing.
1. Check your credit score -The best interest rates are going to those with the best credit scores. If your credit score is less than stellar, consider waiting a few months so you can strengthen your score. You can do this by making sure to pay all your bills on time, and by eliminating debt.
2. Think about a shorter-term mortgage - You can save yourself a ton of money by switching from a 30 year loan, to a 15 year. If you can afford it, 15 year is definitely the way to go. Unfortunately we couldn't afford it. But we are paying an extra payment each year, which will have us paying off our 30 year mortgage in just 18 years.
3. Don't bite off more than you can chew - Be certain that a new mortgage payment would be affordable. Standard guidelines suggest keeping housing expenses below 35% of your total income. However, keep in mind, as a Christian we are to be tithing 10% of our income. Standard guidelines don't take this into account.
4. Don't forget private mortgage insurance - If your financing more than 80% of your home's value, you're required to pay PMI. This is an added expense that many people don't consider. The good thing is it's tax deductible at least through 2010.
5. Don't count on a high appraisal value - In this current housing climate, lenders are very cautious about over-valuing homes. They are relying on comparative property sales figures from very recent sales. In order to get the best refinance deal, you should have equity totaling at least 20% of your homes value.
With anything these days, just be cautious before you make a decision. Most people would wise to refinance right now, but don't do it unless it's the best decision for you. Remember, most of the time, refinancing isn't free. Makes sure it's worth it.
1. Check your credit score -The best interest rates are going to those with the best credit scores. If your credit score is less than stellar, consider waiting a few months so you can strengthen your score. You can do this by making sure to pay all your bills on time, and by eliminating debt.
2. Think about a shorter-term mortgage - You can save yourself a ton of money by switching from a 30 year loan, to a 15 year. If you can afford it, 15 year is definitely the way to go. Unfortunately we couldn't afford it. But we are paying an extra payment each year, which will have us paying off our 30 year mortgage in just 18 years.
3. Don't bite off more than you can chew - Be certain that a new mortgage payment would be affordable. Standard guidelines suggest keeping housing expenses below 35% of your total income. However, keep in mind, as a Christian we are to be tithing 10% of our income. Standard guidelines don't take this into account.
4. Don't forget private mortgage insurance - If your financing more than 80% of your home's value, you're required to pay PMI. This is an added expense that many people don't consider. The good thing is it's tax deductible at least through 2010.
5. Don't count on a high appraisal value - In this current housing climate, lenders are very cautious about over-valuing homes. They are relying on comparative property sales figures from very recent sales. In order to get the best refinance deal, you should have equity totaling at least 20% of your homes value.
With anything these days, just be cautious before you make a decision. Most people would wise to refinance right now, but don't do it unless it's the best decision for you. Remember, most of the time, refinancing isn't free. Makes sure it's worth it.
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