Refinancing your home mortgage can be a wonderful opportunity to take advantage of a variety of different things. Many people refinance in order to avoid foreclosure, get a lower interest rate, or extend the term of the loan. If refinancing your home is in your future, you may want to take a look at some of the cost requirements associated with doing so.
Basic Financial Requirements
Whether you are looking to avoid foreclosure, or just simply want a better rate, it is important to understand the basic financial requirements behind refinancing your home’s mortgage. Most lenders are going to require that you have a steady monthly income and are not currently in default on a mortgage loan. While you may be looking to avoid foreclosure by refinancing, you need to make sure you are stable enough to approach creditors. It is best to refinance far in advance if you foresee future financial troubles.
Remember that a mortgage lender is trying to find out how likely you are to pay back the loan. This means they are more than likely going to want to see some sort of equity in your home. A lender will not allow your refinanced loan to be worth more than the house itself. Most lenders require 5 percent equity in the home in order to consider you for refinancing.
Refinancing a loan requires you to pay closing costs. You need to set aside cash to pay points, title search fees, appraisal fees, loan application fees, and title insurance. These costs must be paid at the time of refinancing.