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Tips To Refinance Your Home

There are several reasons to consider refinancing the mortgage on your home, and a popular reason is to consolidate higher interest debt with your mortgage. A cash-out refinance allows you to get cash for the equity in your home, and if you have substantial equity built up in your home it could be a good option. But if a cash-out refinance does not align with your financial goals, then you could consider a refinance to lower your mortgage interest rate.

The idea of refinancing your home loan may seem daunting at first. But with some careful preparation and thorough research, you can go into the process feeling informed and confident. Here are a few of our favorite tips to refinance your home.

1. Know Your Goals
Before you apply to refinance, make sure that you know exactly what your goals are. You should have a clear picture of your current financial situation and monthly budget. Here are a few questions to consider:

  • Do you want to refinance your mortgage to lower your interest rate or to get cash-out?
  • How much debt do you have to pay off?
  • How much cash-out do you need from the refinance?
  • How much do you want to lower your mortgage payments?

Refinancing can potentially help reduce monthly payments, lower interest rates, or cash-out some home equity. When you have answers to the questions above, you’ll be better prepared to talk to a lender about loan amounts and interest rates. Contact Mr. Cooper to talk to a mortgage professional about your refinance goals.

2. Consider Your Options
Before you talk to a lender, it is a good idea to educate yourself about the different home loan options. Two of the most popular home loan options are fixed-rate loans and adjustable-rate loans, or ARMs. A fixed-rate loan will keep your interest rate the same for the term of the loan, while ARM loan rates change with trending interest rates.

Also consider whether you will pay discount points for a lower interest rate, and weigh your options regarding the term of the loan. Do the math with different scenarios to determine the best fit for your financial situation and goals. Mortgage calculators can help you make comparisons.

3. Streamline Your Finances
Before taking any sort of financial action, it’s a good idea to streamline your budget and take a close look at your finances. Your income, savings, credit score, and debt will play an important role in refinancing a mortgage. With a lower credit score, you might not be able to obtain the lowest possible interest loan. If you are carrying too much debt, you might not be able to qualify.

It is important to make sure that your credit score is the best it can be, and that your credit isn’t frozen when you apply for refinancing. Your credit score is an extremely important part of refinancing, but you will also need to pay any back taxes on the property and clear any tax liens.

4. Prepare Your Paperwork
The lender will need quite a bit of documentation from you to process your loan refinance application. To streamline the process, gather all of your documents beforehand and check with your lender for a complete list of what’s required. Among other things, you’ll likely need your last two years’ tax returns for yourself and your business, if you are a business owner: your last two years’ W2s and 1099s and your bank statements for the last two months.

5. Prepare Your Home for the Appraisal
The amount of money available to you through a cash-out refinance will depend in part on the appraised value of your home. There are a few ways to prepare your home for an appraisal to make sure that you maximize value: Double-check that your home is in its best condition, and make sure that all safety measures such as smoke detectors are in working order. Preparation for an appraisal is similar to staging your home for sale, so make sure everything is in working condition and that nothing is obviously broken or in need of repair.

For more information on cash out refinances, contact Mr. Cooper today.