If you are thinking about refinancing your home, there are a few things that you need to know before contacting any banks. Many people assume that the institution from which they have their home loan is the only option available to them when it comes to refinancing their home. This misconception has caused many people to apply for refinancing, get denied, and then completely give up at finding a better interest rate on their home loan. Finding a great interest rate for your home loan does not have to be difficult if you are willing to do a little bit of research and choose to fight, rather than give up the first time you are denied.
The first thing you need to do before you apply for refinancing is to get your home appraised. When you first bought your home, it was appraised at a certain value. As the stock market fluctuates, the value of homes also fluctuates. That means that your home could currently be worth less or more than you originally purchased it for. It is important to have a professional come and assess the value of your home to make sure you know what it is really worth. You also need to let the appraiser know if you have made any upgrades to the home. Adding rooms, updating appliances, or changing roof shingles can add value to your home. Be prepared to get an appraisal that is not as high as you think it should be, otherwise you may be disheartened when the appraisal fails to meet your expectations.
After your home is appraised, you will be ready to go to the banks with all of the information they need to decide if you are eligible for refinancing. If you owe more on your house than it is currently worth, that could be a significant problem. Many lenders will not give you a loan for your home when you owe more than it’s worth because it would be taking a risk on their part. You will not have any equity built in the house, which looks bad to them.
If you find that you do not owe more on your home than it is currently appraised at, you will be ready to hit the banks with all of the information they need to make an informed decision. It could take a few weeks to find out if you are approved for the refinancing, so it is important to make sure that you are not relying on the refinancing to make ends meet. If you are delinquent on your mortgage payment, it will look very bad to the lenders, so it is important to pay it right away.
By Andrew Watson