The best way to refinance a mortgage
In the easy-credit years of the housing boom, refinancing your mortgage was almost as easy as showing up at your lender's office with a pulse and a driver's license. These days you'll need considerably more documentation — not to mention very good credit — in order to refinance. Still, when mortgage rates fall far enough below what you're now paying on your current mortgage, it makes sense to refinance.
Before you set out to do so, you need to ask three questions:
- Is your application likely to be approved? That depends on your creditworthiness, but also on the value of your home and current mortgage.
- Will refinancing actually save you money? If you don't plan to stay in your home long enough to recoup your closing costs, you're probably better off sticking with your existing home loan.
- Are you getting the best possible deal? There are still a lot of loans out there, and you'll need to understand the market to make sure you're not overpaying.
The links below will help you understand the current state of the refinancing market, your own refinancing prospects, and how to find a good deal.
To determine whether you should refinance your home, says MoneyWatch.com's Jill Schlesinger, investigate these three areas: your credit score, your home equity, and whether you can actually save money.
A quick guide to what you'll need if you want to refinance your mortgage payments. The keys are: a good credit score, some home equity buildup and patience. A jumbo loan will mean a higher interest rate than what other borrowers pay. And you may need to pay off a home equity loan or credit line.
A how-to guide to get the best refinancing terms possible. You'll learn where to borrow, how to find the best rates, and the hazards to avoid.
If you refinanced your mortgage in 2008, you'll want to see how to claim all the related deductions on your '08 federal income tax return. Here's a guide to the write-offs.
Before committing to a lender for refinancing, you'll want to find the lowest rates and best terms. Bankrate.com will give you the latest data, once you plug in the type of mortgage you will refinance.
This handy calculator will help you determine whether it pays to refinance your mortgage. You enter info about your current loan and what you expect your refinancing costs will be. Then bankrate.com shows you how much, if anything, you'll save and how long it will take to recoup your costs.