How to Refinance

Refinancing is one of the techniques used by many borrowers to relieve themselves from high interest rates and from the burdens of financial obligations. This is usually seen in consumer loans like home mortgages.

As interest rates are falling today, it may be high time to undergo refinancing. For home mortgages more than 5-6 years old, you may soon find out that the interest rates in your mortgage are comparable high than the rates you may be getting today.  With proper financial advise and the proper refinancing company, you're well on your way to refinancing. You can follow 8 essential steps in refinancing your home mortgage.

Plan your refinance.

The first and foremost thing to do is to get a pre-appraisal of your home. Be a look out for houses similar to yours and try to gauge how much they are. You can try local classifieds, or even the Web for the market value of your house or similar houses in your area.

Calculate your mortgage amount.

In order to calculate your mortgage amount, multiply the value of your home by 80%. This still depends on your credit, as you can get roughly this amount if you have medium good credit. However, if your home value declined or if the mortgage is 125% of the current home value, you may be in a deeper pool with a standard mortgage. Rethinking about refinancing is a good idea in this case.

Prepare your documents.
Lending companies will give you a list of what documents to prepare, then they take it from there. Be sure, however, to get information on your current loan company, the insurance company of your home and, if any, a law office.

Consult a bank or a broker.
Most of the time, banks offer the best rates as you can get 0 point mortgages from them. You may also consult a mortgage broker who can lay out various offers for you. Be sure to pick the best that suits you, as there will be a lot of offers available.

Have an actual appraisal.
Your prospective lending company will usually do this type of work. This is usually done once you have submitted a refinancing application to them. Be sure to keep your home and the yard clean, as the appearance of your home can affect its value.

Be open to offers.
Always be open-minded when it comes to offers for your home. Some may offer higher points than others. A rule of thumb here is to go for low points if you will be selling the house in less than 5 years. If you will own the house, opt for higher points with lower interest rates.

Have representation.
Closing an existing mortgage is a legal deal, and there will definitely be lawyers involved. Your lender can provide you legal representation, but you may provide your own if you want.

Attend the closing.
This is pretty self-explanatory. To better understand the situation and the deal, attend the closing of the previous mortgage. Here, you get to see firsthand the implications, and stipulations if any.