Refinancing: 5 Things You Need to Know First

If you're thinking about refinancing an existing mortgage, here are 5 things you need to consider first:

A fixed mortgage rate guarantees your monthly payments will not change even if the housing market does. If the interest rate goes up at any given time, you'll know you've been wise since your rate remains the same. You have a few things to consider in terms of whether you should refinance in an effort to guarantee the lower rate, however, if the housing market rate decreases.

You have to bear in mind the percentage point break first. What is the difference between the rate you are currently paying and the real estate market's current rate? In spite of how attractive that lower market rate is, most people believe you must only think about refinancing when there is a full percentage point difference between what you're paying on your mortgage and where the market is today.

Transactions fees charged by your mortgage lender are also important to note. When you decide to refinance, these are the fees you'll be charged. You may lose all or most of the benefits you would gain in refinancing to begin with, if the fees are high enough. Certainly think about this before refinancing.

You may be rejected, so remember this fact, as well. In fact, it's not uncommon when more than half of Americans are looking to refinance right now.

Another factor to consider is, specific criteria needs to be met before you are able to refinance in the first place. The best rates you can obtain through refinancing will often be established by your credit score. While 720 is still thought by many to be a high FICO score, it might not be good enough to get you the rate you truly want when refinancing. In order to get the lowest rates, the goal would be to have a 740 or higher. It may pay to obtain your FICO score before you even begin shopping for refinancing.

Finally, shopping around is essential. A rate quoted to you by one lender might not be your best option. The only way to know is to visit different mortgage lenders and do your research. This will take some time on your part, but it is really the best way to net yourself the lowest rate possible. It will undoubtedly be worth the effort, since this was what you were hoping for in the first place.