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Let’s start off by having a better understanding on what it means to refinance your mortgage. In simple terms, mortgage refinance is to replace an existing loan with a new one. This process is done by many homeowners for a variety of different reasons such as shortening the mortgage period, to raise funds for emergencies, debt consolidation, etc., or to even achieve a lower interest rate.
Your personal circumstance needs to be taken into consideration when looking to refinance your mortgage. There are a certain number of things you need to keep in mind before turning towards mortgage refinancing in order to ensure you don’t make a rash decision. Here are a few important pointers you need to know before applying for a mortgage refinance.
Credit score
Due to the increased standards for loan approvals, not everyone gets qualified to receive a mortgage refinancing for low interest rates. The mortgage lenders often want you to own a credit score of 760 and above in order to receive the refinance mortgage.
Refinancing reason
Believe it or not, refinancing your home is no walk in the park and can be expensive. Therefore, it is absolutely important for you to have a solid reasoning. Once you’ve figured out your reason, thought it through and decided to move further, make sure the process is worth the mortgage refinancing cost and expenses. If you’re looking for a mortgage broker Melbourne has some great options.
Home equity
Always keep in mind to note your home value before pursuing mortgage refinancing. Almost all lenders expect at least 80% of your home value. The equity of your home is one other factor that the lenders take into consideration when it comes to qualifying for their mortgage. Therefore, if your house value is more towards the lower end of the scale, so are your odds for taking up a refinance mortgage.
Up-to-date rates
It is important to note the current mortgage rates in order to have a better understanding of the amount you’ll be paying before having to submit the application. Mortgage rates don’t often stay in the same range. The scales often tip back and forth. Avoid looking into rates that are higher than what you’re already paying.
Refinancing cost
Loan burrowers often find tactic way to reduce the costs of their payment. If you have a higher equity, this would usually work in your favour. Negotiating can help you work around the cost. Did you know that in order to refinance your home, it would cost a three to six percentage of your total loan amount?
Debt-to-income ration
In order to follow through the mortgage refinance, you need to know your debt-to-income ratio. Your debt-to-income ratio is basically the amount of money that goes into your debts off of your income. Refinancing can become a hectic task if you’ve got more debts on your shoulder.
A few other things to keep in mind are the breakeven point, closing and mortgage insurance.
