You have owned your Florida home for several years. In that time, your salary increased along with your credit score. Now is a great time to consider refinancing your residential property.
Refinancing is not without its pitfalls. Educate yourself on where you may stumble so you do not miss out on substantial savings, and so you do not risk losing money.
Not having a good credit score
Before refinancing, check your credit score. You need a high score to enjoy the lowest interest rate when refinancing. You may need to correct or report inaccurate or outdated items on your credit report, so look over yours before applying for refinancing. Doing so helps improve your score faster.
Failing to properly time refinancing
Timing is everything for refinancing. While exploring your refinancing options, compare the proposed interest rate with your initial mortgage’s interest rate, checking to see that you have a lower new rate. Also, aim for having at least 20% home equity before moving forward with refinancing, so you do not have to worry about the added (and unnecessary) financial burden of mandatory private mortgage insurance. Lastly, you want a low debt-to-income ratio, so you make for a more promising borrower.
Taking out cash when you refinance
You may be able to take out cash when you refinance, but you are better off leaving that on the table. While having access to more cash is nice, you also extend the amount you borrow, which means extending the time it takes for you to repay your loan. Additionally, taking out cash reduces your home equity.
Prepare a proper strategy when you feel ready to refinance. It is better to learn from others’ mistakes than learn from your own.