Refinancing Your Home
All homeowners consider refinancing their homes at some point in time. It’s important to understand what it means to refinance your home, and what exactly that it does when you refinance. Can you say that you know what it does? Judge Napolitano thinks that it’s important that you know exactly what refinancing your home means, before you decide to do it.
Refinancing your house basically just means that you are refinancing your mortgage that you have already. The bank will pay off your existing mortgage, and you will have a new one. This is why it’s called refinancing.
There are things that you need to watch out for when deciding if you want to refinance your home, or mortgage:
- You need to know your credit score.
- You need to know your home’s equity.
- What does it cost to refinance?
- What’s your debt to income ratio?
- Rates Vs. Terms
- What’s your break even point?
You definitely do need to take all of these into consideration when considering refinancing. Your credit score matters. If it’s at a lower score than when you first got the mortgage contract, then there’s a chance that refinancing won’t be much of a help to you.
You also have to know your home’s equity. You need to know what your home is worth, and the value it has, especially if you have made any upgrades, remodels, or additions to the house since you first purchased it. Your home’s equity plays a huge part in refinancing, just like your credit score.
Your debt to income ratio is very important in refinancing your home as well. Banks are not going to want to refinance your mortgage if you owe a lot of debt to begin with, and have a lot of loans. Your income needs to be sufficient enough to cover your debts, and make your debts not look so bad in comparison.
The rates and terms of refinancing your mortgage need to match, or hopefully be better than the ones you already had. That’s part of why most people refinance, to get better rates, and for better loan terms. Normally their credit score is better, and with everything else being on a better track, it plays a part in being able to get better rates and terms. You just definitely do not want to refinance your mortgage and wind up with worse rates and terms than you had to begin with.
At what point will you break even in refinancing? You have spent money making payments on your mortgage every month. This adds up. Sometimes when you refinance you can get cash back as well, or break even. You need to know at what point you break even in refinancing, so you don’t get taken advantage of. There’s no fun in that.
Even people like Judge Napolitano know how important it is to fully understand what it means to refinance your home, and mortgage. Please make sure you do the research before going into it.