Homeowners who are in need of cash to make a major home repair or pay for unexpected expenses often refinance their homes to do so. While this means added mortgage debt, refinancing the home offers a readily available avenue to access the cash needed without racking up credit card debt or taking out a personal loan, both of which may have much higher interest rates.
If you are a homeowner who is planning to refinance your home for the first time, here are some tips to help you successfully navigate the process and achieve the best results.
Determine what you can afford
The first thing to remember when preparing to refinance your home for the first time is to make sure you know ahead of time exactly what repayment figures are affordable for your current situation. Like the initial mortgage, refinancing a home should only be based on your current income and expenses, not on the raise you think you will have next year or a bonus that might or might not materialize.
To ensure that refinancing your home will not become a financial problem later, it is also important to always aim to pull out the least amount of cash you can. Additionally, it is important to verify that all repayment terms will continue to be affordable after the refinance process has been completed.
Avoid extending the repayment term
While lenders may offer the option of extending the loan by several years in order to reduce the amount of the monthly payment amount, doing so should be avoided, if possible. Home mortgages incur higher interest rates during the earliest years of the repayment term, lessening with each mortgage payment that is made. Homeowners who agree to an extension of the repayment term are essentially agreeing to start over and will be paying significantly higher interest after refinancing.
Shop around for the best refinance deal
While your current bank or mortgage lender can be a great starting point when looking to refinance your home mortgage, they may not offer the best terms. Homeowners who have a history of making their mortgage payments on time and good overall credit may find more affordable options for refinancing their home with a competing lending institution.
To learn more about the home refinance process, including how the current real estate market affects the market value of your home, homeowners should consider consulting with a trusted real estate professional such as Tennessee Home Mortgage. These experts will be able to supply current comps to help give homeowners an good idea of what their home is currently worth as well as provide information about current refinance rates and referrals to high quality lenders.