Do you find yourself short of cash and needing to replace your house's roof or perform some other major home repair? Are you wondering how you're going to be able to pay for everything that needs to be done? Refinancing your home can be a good option, especially when interest rates are around the same or are even lower than when you first got your mortgage. But before you go out to refinance, here are some questions that you need to ask yourself:
Are your payments on time? If you've missed more than a handful of payments on your mortgage, refinances can be difficult or even impossible to obtain. Your bank may allow you to refinance to get a lower interest rate, lowering your monthly payments, but they are much less likely to allow you to take anything out of your equity when you go through the refinance process. Third party lenders, those not associated with your current mortgage holder, may not want to work with you at all. You may be able to find a lender who will refinance your home, but don't be surprised if you get turned down multiple times before you find one that will loan you money.
How long have you owned the house? If you've only owned the house for a couple years, it may be difficult to find a lender willing to do any refinances on the property unless the value has risen substantially since you purchased it. During the first few years, your mortgage payments will only barely be paying off the loan amount; most of it will be going towards the interest. So just because you've paid $30,000 in mortgage payments does not mean that you now have $30,000 in equity. Depending on your monthly payments, that may only translate to a couple thousand dollars being taken off of the principal loan balance.
What do you need the money for? Some lenders may be more willing to do refinances for certain repairs than for others. For instance, installing a new roof will allow you to recover up to about 63%of the installation cost if you should decide to sell your home soon after. On the other hand, cosmetic remodeling projects, such as replacing your kitchen cabinets, may not offer as much value for the money. Although it may seem harsh, some lenders have to assume that they'll need to foreclose on your house and sell it in order to get their money back. Because of this, they may want to be assured that the money will be going towards high-value projects.
For more information about these questions and other issues with refinancing your home, contact a local company like Liberty Escrow Inc.
