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What to consider before refinancing a home loan

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It isn’t uncommon to spend up to 30 years paying off the mortgage on your Pennsylvania home. During this time, changes in market conditions might mean that you’ll benefit from renegotiating the terms of your existing loan. You may want to take a closer look at how to determine if now is a good time to do so.

Can you get a lower interest rate?

If the interest rate on your existing mortgage is lower than what lenders are currently advertising, it may not be worthwhile to seek new loan terms. An exception might be made in the event that you have a loan with a variable rate that is set to adjust in the near future. In such a scenario, it may be a good idea to shop around for a fixed-rate mortgage in an effort to keep your monthly housing payment at an affordable level.

What will it cost to refinance?

When you refinance your home loan, you’re replacing the existing loan with a new one. Therefore, you may have to pay closing costs such as documents, real estate attorney and appraisal fees. There is also a chance that you’ll be assessed a prepayment penalty. Depending on where you live, closing costs may be as high as 5% of the amount that you want to borrow. However, your lender might be willing to waive some of these fees.

Will a lender want to work with you?

You will need to meet minimum lender standards to qualify to refinance your home loan. As a general rule, this means having a credit score of at least 640, cash reserves in a bank account and a down payment.

Refinancing a home loan could make it easier to afford your monthly housing payment. An attorney may be able to explain the process of refinancing a mortgage or help you submit the paperwork to do so. If necessary, a legal representative might also assist in the process of disputing the results of a lender appraisal.