How to Refinance

Even though the housing market is in a downturn, now may be the perfect time to refinance and save money. If you refinance now you can lock in the low interest rates on mortgages that many banks are offering. Choosing to refinance also may help you to save your home. Making the decision to refinance will allow you to take advantage of the lower interest rates being offered because of the economic downturn. If you have good credit, refinancing it s great option.

Difficulty: Easy

Instructions

Things You'll Need:

• internet
• credit score
• house value
• current mortgage terms

1. 

   Will You Qualify To Refinance?
   Since interest rates are falling many people are looking to lock in and refinance, however with difficulties in the banking world, requirements have become more strict and not everyone will qualify to refinance. Know ahead of time if you can refinance so you don't waste time and money trying. Basically, to qualify to refinance in today's market you need 20% to 25% equity in your home, a credit score of at least 750 and not to own a lot of investment property. Do not pay for appraisals and the fees it takes to apply to refinance if the chances of you qualifying are low.

2. 

   Use a Refinance Calculator to Decide if its Worth it!
   The next step when deciding whether or not to refinance is to make sure it is worth it and you will actually save money over time. A general rule to determine if refinancing is worth it is that you need to cover all your closing costs with the savings from your refinance within two years. CNN Money has a good refinance calculator, the link is in the resources.

3. 

   Know why you want to refinance!
   You need to know exactly why you are trying to refinance. Do you want to get out of an adjustable rate mortgage or interest only arm? Do you want to increase or decrease the length of time on your mortgage by refinancing? Are you choosing to refinance to lower monthly payments and lock in at a lower interest rate? You need to know exactly why you want to refinance before going out to do it. You need to be able to tell the lender why you want to refinance so they can help you find the best deal.

4. 

   Shop Around!
   Start with the lender you currently hold your mortgage with and then call both major institutions and small credit unions when looking to refinance. Unfortunately due to the economy, the lender is in control when looking to refinance but don't move forward without getting at least 3 quotes that include all the fees associating with a refinance.

Tips & Warnings

• Know as much as possible when thinking about refinancing. Knowledge is power!
• Make sure you know all the fees up front to refinance! It can be very expensive!

Resources

• Refinance Calculator
• How to Check Your Credit Score
• How to Avoid Foreclosure

[Coach4U]

on 2/17/2009 Good article, full of good information.