Buying a home, especially for a first-time homebuyer in Phoenix, is one of the most significant financial choices you’ll ever make. However, it is important to note that the decisions don’t end there. If you really want to manage your finances effectively, it’s vital that you explore all the possible options when it comes to your home. One thing that you’ll want to consider doing is refinancing your mortgage.
This can be rather intimidating as many of you may not know how to go about doing this. To help you out, we’ve prepared a brief discussion on refinancing your mortgage. If this is something that you want to know more about, read on as we break down everything you need to know about mortgage refinancing.
Reasons for Refinancing
The main question that’s on all of your minds is why should you even consider refinancing in the first place. Well, refinancing your mortgage can have a slew of different benefits as long as the situation is right. Here are the most common reasons for refinancing:
- Reduced Payments: One significant reason for refinancing is it can lead to reduced payments. Some people may not know this but the rates for loans are always changing. This is doubly true if a significant time has passed since you last took out your loan. If the rates and terms are more favorable then you should refinance your mortgage to help you save more money down the line.
- Increased Property Value: The rates for mortgages aren’t the only things that are changing. Property values are also perpetually changing, as the market dictates the value of your property. If your property value has increased, then you should definitely consider refinancing. Refinancing when your property’s value has increased gives you access to better terms and rates.
- Significant Financial Changes: If your income has increased and you can now afford to pay a higher rate, then it might be time to refinance. While paying a higher rate may seem unwise, it allows you to pay off the loan much quicker. Fully paying off your mortgage is crucial as it will give you infinitely more financial flexibility for the years to come.
Steps on How to Refinance Your Mortgage
Given the many advantages attached to refinancing, many of you may want to know how to go about doing this. Here are the steps that you need to take in order to refinance your mortgage:
- Set a Financial Goal: Before you do anything, be sure that you have a clear financial motive for refinancing. The last thing you want is to waste time and resources doing something that may not even be necessary.
- Check Your Credit Score and History: Once you’re certain that you want to refinance your mortgage, you should check your credit score and credit history. You will need to have a good credit score and history in order to be approved for refinancing. The better your score and history are, the better rates and terms you’ll be getting.
- Determine Home Equity: Since home equity is the value of your home in excess of what you owe your mortgage lender on your loan, it’s important that you know how much home equity you actually have before refinancing your mortgage. This will give you a good idea of what type of deal you should be able to get. The more equity you have, the less risky it is for your lenders to allow you to refinance.
- Peruse Different Mortgage Lenders: Not all lenders are the same. This is why you’ll want to check out different mortgage lenders to see which one will give you the best rate for refinancing. Doing this can potentially save you hundreds, if not thousands, of dollars.
- Be Transparent with Your Finances: A little transparency goes a long way when it comes to refinancing. If your lender has an accurate picture of your finances, the more likely it is for your refinancing to be approved. Be sure to pass along all the pay stubs, federal tax returns, and bank statements to your mortgage lender upon request.
- Get Your Property Appraised: Once that’s all done, your mortgage lender will have to appraise your property to determine its current market value. Be sure to inform your lender of any improvements and repairs that you have made to the property to get the best appraisal possible.
We hope this article proves to be useful when it comes to helping you better understand mortgage refinancing. As you can see, it’s not really that complicated and can be done by pretty much anyone as long as the necessary preparations are made. For more information on mortgage refinancing, it’s best to speak with professional mortgage experts.
Desert Springs Mortgage is a full-service mortgage company in Phoenix, Arizona. We offer our clients FHA loans, VA loans, asset-based lending, and other financing options. For more information, visit our website or call us at (623) 432-1309!