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8 things to do before refinancing

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  • 8 things to do before refinancing

    With 30-year interest rates well below 5 percent, and 15-year interest rates between 4 percent and 4.5 percent, it's time to start seriously thinking about refinancing your mortgage.

    But before you high-tail it to the nearest mortgage lender and fill out a mortgage application, there are eight things you should do:

    1. Check out the interest rate you have on your current loan. When interest rates dip, the natural inclination is to start filling out loan applications left and right. But too many times, homeowners are focused solely on the new interest rate instead of how much they'll save by refinancing. While you may get water cooler-bragging rights, you should refinance only if it's going to save you money.

    2. Find out how much your home is really worth. There's no way to sugarcoat it: Home values have sunk around the country an average of about 20 percent in the past year. In some places, such as Las Vegas, Miami, Phoenix and the San Francisco Bay Area, the decline has been twice as steep. It's vital to assess whether your home still has any equity (the difference between what you owe and what the home is worth) or if you are "underwater" with your mortgage (meaning that you owe more to your lender than the property is worth. Whether you have equity will determine what kind of refinance is open to you.



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