Best strategies for refinancing your home

Chances are that your local newspaper has advertisements from home mortgage lenders advertising new, lower interest rates.  You log onto your computer and all over the internet you see ads for lower interest rates.  You might be wondering if it is time to consider refinancing your home.  Let us look at the best strategies for refinancing your home since interest rates are lower.

  • Calculate the difference - the first thing you should do is determine how refinancing your home is going to affect your monthly payments.  Not only should you consider how much your mortgage payment will change but, you should also look at how it will impact your homeowner’s insurance and your income tax.  Since your mortgage interest can be deducted on your taxes, determine the impact.
  • Can you consolidate? - if you have credit card debt or other debt that you can pay off by refinancing your home, you should also calculate the amount that you may be saving. There are mortgage calculators that are available on-line that will help you determine (based on set rates) how much your mortgage payment will be.  Gather all of your credit cards together, and sort them by interest rate.  Write down the current balances and use a credit card calculator to determine how long it will take to pay them off if you do not include them when refinancing your home.
  • Contact a Realtor - get an approximate market value of your property.  Once you have obtained a market valuation (not to be confused with an appraisal) you can determine if you are eligible for a refinancing of your home.
  • Obtain your Credit Report - before you take any further steps towards refinancing your home, contact all three credit reporting agencies and request a copy of your credit report.  Remember, you may request one free copy of your credit report every twelve months.  Verify that all the information on your credit report is accurate.

Once you have completed these steps you then can decide if you will benefit from refinancing your home. The next best strategies come when you begin discussing your situation with lenders. Here are some strategies for helping ensure you get the best possible refinancing terms for your home.

  • Contact your current lender - if you currently have an adjustable rate mortgage (known as an ARM) you should discuss with them the possibility of refinancing to a fixed rate mortgage. Let them know how much work you have already done in research.  Advise them that you have done the calculations (and at what rates), if you are paying off credit card debt (known as a cash out refinance).  Also let them know what you have found out about the current market value of your home and any information that might be pertinent from your credit report.
  • Contact other lenders - contact other lending institutions after you speak with your current home lender (regardless of what they tell you) and find out if you can get a quote for a lower interest rate.  While these quotes are usually non-binding until contract, they will give you some leverage with your own lender.  Make sure you provide these lenders with the same information you provided to your lender (with the addition of your current outstanding mortgage).
  • Negotiate - there is usually room for negotiations with your lender. You may be able to get them to waive all (or some) of the closing costs, if you decide to stay with the same lender many times there are other fees they would consider waiving.   You should attempt to get the best deal possible when you are attempting to refinance your home. 
These are some of the best strategies to employ when you are considering refinancing your home. After you have thoroughly reviewed all the implications of refinancing your home, you will see that these best strategies can help you successfully close the deal.