If you are considering refinancing your home it is time to take action now. Because of declining home values waiting too long could prove disastrous. If your current mortgage and other liens on your home are less than 80 percent of your home’s value you still have a great opportunity available to you. It is important that you have verifiable employment and can afford a new loan just as it always has been but if all things are in place that would normally be required you have a great chance of getting a good interest rate even in these difficult times.
However, the decline of home values is making things difficult for those who are seeking financing. As the equity value of your home shrinks the likelihood of getting a favorable interest rate shrinks along with it. Once you owe more on your home than it is worth as is happening quickly in many areas, the chance of getting any refinancing is almost none. What that means is if you have given refinancing enough thought and are certain it is right for you and your family do not put it off waiting for a better mortgage environment. It isn’t likely to happen.
The longer you wait the more likely home appraisers will be conservative in their estimates as well. It seems the days of over-estimating a home’s worth are gone for good. In the past appraisers often padded the value of a home with the general blessing of the mortgage industry. With the current market the way it is you will be lucky if your home is not undervalued to off-set the chances it will depreciate further.
Remember that when you are considering refinancing it is important not rush into it. As contradictory as that sounds, even though it is important to take action quickly before values drop further, do not rush into a bad deal just to make it happen.
- Shop around for the best interest rates. It doesn’t take any longer to apply with several institutions and you will get offers back at the same time so you can pick and chose the rates that are best for you. Many companies are available to make multiple submissions for you so that you only have to fill out the forms once and they handle the rest, showing you all of the available options when they come in.
- Watch out for hidden fees. Unlike new home financing you should not have to pay for appraisal fees or application fees on a refinance. Check the fine print of any loan offer to be sure they are not adding those fees into your total financing amount.
- Save some equity. Don’t let the temptation to tap out your equity get the better of you. It is always a good idea to have at least 20 percent of the current value of your home remaining when you refinance.
Regardless of the current mortgage environment owning your own home is still one of the wisest investments for your future. While the situation at hand does mean that fast turnarounds are less likely to yield great windfalls of cash, long-term ownership will reap the rewards they have always shown.
Refinancing in today’s economy should be thought out completely before taking a chance with your family’s home. Using money for frivolous items that have little or no long term value is an unwise investment that could put your family in peril if you cannot afford to pay the higher mortgage as a result of it.
If you are going to use your home for collateral and use up equity make good use of the extra money. Invest wisely, or put it back into your home. Not only do home improvements make your home more comfortable and pleasant to live in but they add value so that you are less likely to experience the problematic devaluation of your home you might otherwise see.