9 Things to Know Before You Refinance Your Mortgage

When considering whether to refinance your mortgage, it's important to base the decision on your personal financial situation rather than just current mortgage rates. Factors to review include your home equity, credit score, debt-to-income ratio, and refinancing costs. Having at least 20% equity can make it easier to qualify for a loan with better terms. Lenders typically look for a credit score of 750 or higher for the lowest rates and a DTI ratio of 36% or less. Refinancing costs can range from 3% to 6% of the loan amount, but there are ways to reduce these costs. It's crucial to establish your goals when refinancing to choose the right mortgage product. Consider factors like interest rates, points, and how the refinance will affect your taxes. The breakeven point, where the savings cover the refinancing costs, should also be calculated. Keep in mind that dropping your credit score or changing your financial situation during the refinancing process could impact your eligibility and rates. Consulting with a reputable lender and possibly a tax advisor can help you navigate the complexities of refinancing and determine if it's the right decision for you.