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when to refinance


									ÔªøWith all the talk in the media about refinancing a home, you may wonder when the time is right. This
guide will help.
You have probably heard a lot about refinancing in the news. There are a number of reasons that you may
wish to refinance, including, but not limited to, lowered interest rates. Before you fill out an application to
refinance your home you should acquaint yourself with the reasons for refinancing your home.
What Is Refinancing?
Put simply, refinancing is trading in your current mortgage for a new one. You do this by applying to your
lender. The lender will then reappraise your house to determine how much it is currently worth. You are
forbidden from refinancing your home if there is a lien holder on the property other than the bank.
When To Refinance
Knowing whether or not to refinance is largely a matter of looking at the reasons for refinancing, as well as
factors that make it likely for you to get a good deal on your refinance deal. When you consider which of
these options apply to your situation you will find that the right choice will become clearer. Reasons to
refinance your home include:
¬ High interest rates: If your interest rate is over six percent on either a fixed or variable rate mortgage, you
should consider refinancing. No matter what your interest rate is, if rates have fallen two or more points
since your original mortgage, you should consider refinancing.
¬ Good credit score: A credit score of over 600 makes it very likely that your application for refinancing
will be approved by your lender.
¬ An expensive market: The more expensive your home market, the better an option refinancing is. This is
because refinancing is a good deal if the value of your house is significantly more than what you paid for it.
¬ FHA loan availability: If you are eligible to refinance under a Federal Housing Administration loan this is
an excellent reason to refinance your mortgage.
 Equity: If you aren’t eligible for an FHA loan, you may still want to do so if you have more than 10
percent equity in your home.
Qualifying for an FHA Loan
You will have to talk to a Federal Housing Administration representative for more specific details on
whether or not you qualify for an FHA loan. There are, however, some broad areas that will tell you if you
have a good chance of qualifying:
¬ The property in question is your primary residence.
¬ You have a stable income over the last three years.
¬ You have owned the property for six or more months.
¬ You must have an FHA mortgage or a mortgage from an FHA-approved lender.
¬ Your mortgage must be current and you must have made all payments on time for the last 12 months.
When Not To Refinance
Knowing when not to refinance is as important as knowing when to. If you are on the fence about whether
or not to refinance your home, you may want to look at reasons that would make refinancing a bad idea.
Don’t refinance if:
¬ You have an interest rate less than six percent or you are planning to relocate soon.
¬ Your credit score is less than 650 or you have problems with your credit report.
¬ You live in a market where housing values are on the decline.
¬ You are self-employed.
¬ You are in danger of foreclosure.
Making Your Final Decision
Now that you know the factors about what makes refinancing a good option you are closer to making a
decision about what to do about your home. Those with high equity, good credit and a mortgage rate two or
more points higher than the prevailing rate on the market today, refinancing is probably the right option for
you. Otherwise, keep building equity in your home and increasing your credit score, waiting for the day that
interest rates go down.

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