If you have a vacation home, then the mortgage on it can be a burden for you and you will want to refinance it. However, before you refinance your vacation home, it is essential to know what you exactly expect from the transaction. Here are certain things that you should take into consideration while you refinance the mortgage on your vacation home:
Equity in your property: In order to refinance any kind of loan, the first thing the lender will take into consideration is the equity in your property. You will not be able to know the exact equity in your property unless the lender completes the appraisal process. If you want to get an idea of the equity in your property, then you should be ruthless in your self assessment of the property. Consider recent sales prices of the comparables only.
Consider paperwork: You should arrange all the paperwork before you apply to refinance your vacation home. The lender will ask you to provide him with 2 years of income and employment records, bank statements for the last 2 months, credit report, etc. The lender will also calculate your debt to income ratio depending upon the information that you have provided. In the recent times, the lenders look out for more documents compared to what they used to check earlier.
Other mortgages on the property: It will be difficult for you to get a refinancing on your vacation home if you have more than one mortgage on the property. In order to combine two mortgages into one, you will require a larger equity in your property. Moreover, you will have to seek a subordination of the second loan. If that is not the case, the lender may not refinance the first loan. It will be better to pay off the second mortgage before you refinance the mortgage.
Shop for your loan: You should shop around for your refinance. One of the easiest place for refinancing your mortgage is your present lender. If you have been a responsible borrower throughout the loan, he will easily provide you with a refinance. However, it is not mandatory to do so. You can contact other local lenders and apply for refinance. This will help you know the rates and terms that you may qualify for.
Responsible borrower: If you have been a responsible borrower regarding all your debts, you will find it easier to qualify for a mortgage refinance on your vacation home. If you have been late on your mortgage payments or other debts, then getting a refinance will be difficult.
Refinancing costs: You should make sure that you get a step by step breakdown of refinancing costs. You will be liable for paying the closing costs similar to that of taking out a new loan. It will be better if you could ask your lender to itemise the fees and take out time to explain them to you.
Hope the above mentioned points will help you in refinancing your vacation home without any hassles.