3 Steps to Refinance Your Mortgage

Mortgage rates have reduced significantly. Yet there are very few homeowners who are opting for mortgage refinancing. Irrespective of the reason behind such dwindling numbers of homeowners choosing refinancing, there is still time for you to consider a refinancing. If you cannot pay off your mortgage payments due to some financial reason, then you can opt for refinancing. Do you have any idea of the steps involved in refinancing? If you don’t, then read on this article to educate yourself on the steps that are involved in refinancing.

1. Know how much your house is worth: While you are opting for a refinance, you must be having an exact idea of how much you owe on your house. If you don’t have, you may check the bank’s last annual statement from the mortgage company. Next you need to estimate how much the house is worth at present. Do pay attention to home sales in your neighborhood to get an idea of the worth of your house. Divide the home’s estimated value by the amount you owe on your house. If you owe $70,000 and the house is worth $100,000, then you owe 70% of the home value. Calculate this percentage and write it down in a paper as loan-to-value ratio.

2. Know whether or not you have a second lien: Before going for mortgage refinancing one more thing that you need to consider is whether or not you have a second lien. Do you have a home equity loan (HEL) or a home equity line of credit (HELOC)? If you have then you also need to calculate the amount that you owe on your HEL or HELOC. Add this amount to the amount you owe on the main mortgage loan. Now you are supposed to take that combined amount and divide it by the home’s estimated value. When you go for a mortgage refinancing, these are two percentages that most lenders ask for. So keep these ready.

3. Know whom to call: After you’re done with the calculations, you should know whom to call for a refinance. Do you owe more on the first mortgage than your home’s worth? If it is so, then you should first call the mortgage servicer. You will probably be a good candidate of Home Affordable Refinance Program (HARP). Apply for a HARP from your current servicer.

Thus, if you are looking for the steps to go for mortgage refinancing, then consider the above mentioned steps. Refinance your present mortgage loan and pay off your mortgage debts.

Author: Jim Allen