Mortgage refinancing can be complex, and there are a number of things that can affect your eventual results. It's often not as simple as just signing on the dotted line. Check out this list of tasks many homeowners forget to do as they begin their refinancing deal.
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1. Check Your Credit Report
Your credit score and rating are important aspects of the refinancing deal. Check your credit report to see if it's accurate, because if it's not, you may be missing out on lower interest rates and other concessions.
2. Understand Escrow Account Expenses
An area of cost that sometimes gets overlooked is expenses related to an escrow account. Ask your mortgage lender why an escrow has to be set up, as well as what fees are associated with this extra service. It helps to understand how specific amounts of money go into and out of your escrow account as you pay down your mortgage.
3. Examine the Overall Costs and Fees
Lots of mortgage refinancing agreements include substantial fees of up to several thousand dollars. That's one reason why experts often tell borrowers to wait to pursue refinancing until they have built up substantial equity in their property. The general rule of thumb is to look at how much money refinancing saves you over the course of the mortgage and compare it to the fees and costs involved. If the fees and costs are higher, refinancing probably isn't the best idea.
4. Lock In Your Interest Rate
People often look for refinancing agreements when lower interest rates make refinancing an excellent long-term financial move. But if you can't secure those low interest rates, you might not get the best deal. It's important to go over the document thoroughly to make sure the quoted interest rate is fixed, not adjustable, and the mortgage remains tied to this lower interest rate over time.
5. Ask About a Float-Down Provision
In addition to getting a fixed low interest rate, a float-down provision offers upside protection. In other words, if interest rates fall in the future, the float down gets you better access to refinancing at lower rates. This is something worth pursuing in many refinancing agreements.
6. Review All Documentation
Throughout the process, it's important to know what documentation is needed and where essential details of the contract will show up in paperwork. For example, the refinancing process may require very detailed income information, especially for independent contractors and others with less steady income. Knowing what you need to provide helps make the process go more smoothly.
7. Look for Prepayment Options
Another simple step in refinancing is to ask about prepayment options. Some agreements disallow certain forms of prepayment, which can be a downside for the borrower.
When you talk to lenders, don't forget these basic rules for getting the best refinancing deal for your home. You can save yourself a lot of time and frustration by refinancing online with Lenda.