Can I Refinance?
Can I refinance? With today’s mortgage rates near an all time low, asking “Can I refinance?” may be the smartest idea a homeowner can ask. In recent months it seems you can just turn on the TV and watch rates dropping day by day. Savy homeowners can take advantage of never before seen interest rates to cut huge amounts off their mortgage payment. ”Can I refinance?” The answer is maybe, lets take a look at the major factors that will not only answer “Can I refinance?”, but “Should I?”.
Should I refinance?
Before you ask yourself ”Can i refinance?”, you should ask yourself if you even should. The first thing to find out is how much equity you have in your home. With some real estate markets taking a hit lately, you will want to make sure that your house has enough equity in it to qualify. Most lenders want above 20% equity in the home before they will approve a refinance. But what if my home doesn’t have 20% equity? It’s not always a deal breaker, there are a lot of new government programs that have been created in coalition with the FHA in recent months to help homeowners with low equity qualify for a refinance, such as the Home Affordable Refinance Program (HARP). “Can I refinance with under 20% equity? It is very possible. You will usually be asked to purchase Private Mortgage Insurance (PMI) which varies in cost based on the price of the mortgage, but is usually fairly inexpensive.
Can I refinance?
The next question to answer is, “Can I refinance?”. The most important thing lenders will look at, next to your home’s equity, is your all important credit score. When it comes to credit score the answer is very simple, the higher the better. To qualify for the lowest interest rates you will need a credit score of at least 720 or higher. ”But what if my credit is bad?” Excellent credit is just a rule of thumb for lenders. In many cases, with mortgage rates so low, you may still qualify for rates much lower then your current, even though you don’t have perfect credit or have gone through a bankruptcy.
Can I refinance if I’m upside down?
If you are “upside down”, meaning you have negative equity in your home, there is usually little that can be done. However, as we talked about before there are many new government programs like HARP that can help some buyers refinance, even with negative equity. You would be surprised what some lenders are willing to do, in some circumstances, to help you qualify.
Are there any negatives to a refinance?
It is possible, two questions should be asked before you decide to refinance:
- Can I refinance without prepayment penalties?
- Can I refinance if im planning on moving soon?
Lets look at the first question “Can I refinance without prepayment penalties?” For those of you who are not sure what prepayment penalties are, they are clauses in some mortgage contracts that institute a monetary penalty if the loan is payed off (or refinanced) within a certain amount of time, usually 5 years or less. This is definitely something to ask your lender about before refinancing. Sometimes the penalty may be small, other times it could be substantial. That being said, with rates so low it may be in your best interest to refinance, even with a prepayment penalty. “Can I refinance without prepayment penalties?, don’t forget to ask!
The second question, “Can I refinance if im planning on moving soon?’, is also a very important question to ask. Remember, there are usually closing costs involved in refinancing, and if you plan on selling your home in the next year or two it may cost you more then what you save. On the other hand, there are many lenders who can roll closing costs into your mortgage so you can still benefit, even though you may be thinking about selling your home soon.
Can I refinance? – Closing thoughts
“Can I refinance?” I hope the information in this article has helped you answer that question. The opportunity to refinance with interest rates as low as they are today, is most likely a once in a lifetime opportunity. Hopefully we cleared up some of the questions you had, not only “Can I refinance?” but “Should I refinance?” as well. In closing, it’s always great to check the internet for super low interest rates that are published daily as many banks compete online to give you the best rates.