The new year makes many of us contemplate our goals for the coming 12 months, which often revolve around financial matters. If you’re keen to refinance your home loan to enjoy better rates or to gain some extra funds from additional equity in your property, it’s wise to be smart about how you go about the process. You need to know some tips for getting the best possible refinancing deal.
Clarify Your Goals for the Refinancing
Start by clarifying your goals for the refinancing. You need to know exactly how much money you hope to get access to by making the changes happen, so you know what to ask for and can explain to lenders how you will use the money.
They need to feel secure that you will use the funds for wise plans that will leave them in a position to keep paying back your loan. For example, you may wish to refinance to add a granny flat or guest house to your home that you might rent out or to invest in another property.
Examine Your Credit Score and Improve It as Necessary
Ensure you have a good credit score before you go and start chatting with financial institutions about getting access to a decent refinancing agreement, as most lenders value these credit reports very highly and won’t loan to anyone who doesn’t score well. Check your rating using one of the free or low-cost credit-score services available, and see if any issues are coming up.
Sometimes people don’t realize they have a black mark against their name because of an error that occurred years ago or because they didn’t realize they still owe money on an outstanding loan, etc. If something negatively affects your score, you need to deal with it ASAP before approaching lenders for refinancing deals.
Also, get rid of as much debt as possible, such as by closing some of your credit card accounts or paying off a personal car loan. The lower your debt-to-credit ratio, the more likely you are to be seen favorably by lenders and the more likely they are to say yes to your refinancing request. They will feel safe to offer you better terms and conditions at the same time, too.
Put Together the Paperwork You’ll Require for Lenders
Before you approach any lenders, get your documents collected and organized. For example, collate your recent paychecks or the profit and loss statement, balance sheet, bank account information, etc., for your business if you’re self-employed. You’ll also want to have a few of the last year’s tax returns available.
Most lenders will also ask to see your asset and liability information, and they may want to see your personal credit card and other bank account statements to see your cash flow. Getting this information organized in advance of any lender meetings or application submissions will mean better success than if you leave everything to the last moment or can’t provide crucial details.
Look Into the Fees to Exit Your Existing Mortgage
Before trying to get a refinancing deal, learn the terms and conditions of exiting your current mortgage. See if there are any hefty penalties to worry about, such as costs for exiting the loan early or paying out your mortgage sooner than the contracted term. T&Cs can vary hugely from provider to provider, so don’t assume that those on past mortgages are the same as those on your current one.
Do the numbers on any costs involved to exit your loan earlier than expected. Often, it’s much lower than the amount you’ll save by refinancing, but not always. You may find that you’re better off delaying the refinancing until you’ve reached a point where the termination fees will be lower or other penalties less of an issue; some penalties reduce over the loan timeframe.
Boost the Value of Your Home
You’ll find it easier to refinance your home if you can show financial institutions that the property is worth more now than it was when you got your mortgage. One great way to do this is by renovating the property. You might, for example, replace the flooring, install new lighting, and add elegant smart ceiling fans to each of the home’s main rooms.
You can improve the curb appeal and landscaping of the home by removing dead trees or shrubs and planting attractive new options, adding outdoor entertaining setups, replacing old hardware such as mailboxes, and painting the home externally. You might install heating and cooling options for the home, update the kitchen and bathroom(s), and put in new appliances, among other things.
Before trying to get refinancing sorted, research the various lenders you might approach and ask those in your networks for tips on the best mortgage rates and services they’ve obtained for themselves. Read reviews and testimonials online, too, for help deciding on the best financial institutions to approach.
Take your time organizing for a refinance and following the steps to make it happen. It can take lots of effort and perseverance, but your work will pay off when you end up with the best possible refinancing deal when you’re finished.