5 Things to do before you Refinance

Mortgage interest rates are at record low and you must be planning to refinance your mortgage to take advantage of the low rates. With a good credit score and stable financial situation, you can definitely go ahead and refinance your properties. But again, you should also have a clear idea about the worth of the property. If you do not have equity in the property, lenders won’t refinance your property.

5 Things to keep in mind before you refinance:

• Interest rates: You should refinance your property if it helps you in saving your money. Check out the interest rate on your current loan and compare it with the rate that you would receive after refinancing. This will give you an idea whether you would be saving money or not.

• Refinance Underwater Mortgage: If your mortgage is underwater (i.e. if the worth of the property is lower than the mortgage that you owe), try to assess how far underwater it is. With the introduction of the Home Affordable Refinance program, you may be able to refinance if your loan is not more than the 105% value of the property.

• Identifying Lenders: Once you are certain that you can refinance the loan, start contacting potential lenders. You can speak to a national lender, a local lender or a credit union (you’ve to be the member of one of the credit unions). Speaking to them will let you know about the closing costs, points and other fees that the lenders would be charging you.

• Second mortgage subordination: If you’ve two mortgages on the same property, you’ll have to check out if your second lender is ready to subordinate the new first loan. If the second lender is not ready to subordinate the loan, you may refinance the first loan with him. Or else, you’ll have to pay off the second loan and then refinance the mortgage.

• Paperwork for refinance: Before you go for a refinance, get all your paperwork ready. You should gather you current paychecks, W2, copies of federal and state tax returns, copies of bank accounts, retirement accounts and other assets.