What You need to Know about Refinancing Your Home

ISLAMORADA, Fla. - July 12, 2015 - PRLog -- Per Jan Keller, Top Producing Real Estate Agent for Coldwell Banker Schmitt,”For the majority of homeowners, refinancing is all about capturing and keeping a lower interest rate which allows them to save thousands of dollars. It can also mean having more in their budgets to amortize their mortgage balances at a faster pace, and/or, paying off consumer debt. Before you refinance your home, know about these the following things:

●      There is no actual “Re” in refinancing. A very big misconception about refinancing is that it is just a modification of your current mortgage loan--it’s not. What it is in reality is financing your home starting all over again because you are applying for a new mortgage note. While the numbers will certainly be different, you’ll still pay closing costs, need insurance, and so on.

●      The amount of equity you have matters a lot. Simply put, the more equity you have built-up in the home, the better. Of course, your home must be worth more than you owe on your current mortgage balance.

●      Your debt ratios are equally as important. When you apply for a mortgage, which is what refinancing is, you must have acceptable debt ratios. That means the principal, interest, taxes, and insurance, will need to be under 30 percent of your gross monthly income. In addition, all of your other debt will have to be less than 40 percent of your gross monthly income.

●      Your credit score will play a big role for approval. This is quite straightforward: the better your credit score, the lower interest rate you will qualify for and receive. While lenders and their products differ, one thing that’s common among them is higher credit scores means lower rates.

Last but not least is your future plans. In order for refinancing to really pay-off, you must stay in your home long enough to recapture the money you pay out. Otherwise, it doesn’t make financial sense