Should You Consider Home Refinance, or Not?

by: Jay MonCliff
With interest rates at all-time lows, many people are considering whether or not to refinance their home loan. Generally speaking, if you bought your home with a higher interest rate loan, have an excellent credit history and always pay your bills on time, refinancing your home loan might be a sensible option. However, regardless of your initial situation it always pays to do a little research, and the following suggestions will help you to decide if you need to think twice before considering refinancing your home loan

Home Refinance Tip #1 Having a second mortgage

Refinancing a home that has a second mortgage over it will most likely leave you paying back more than you would need to under your original home loan. It is worth remembering that lenders look less favourably at homes with second mortgages, especially if the second home loan was taken out to help repay other bills.

Home Refinance Tip #2 Your debt to income ratio

Refinancing your home loan follows the same process as your initial mortgage application, where a low debt to income ratio is important in gaining finance approval. A high debt to income ratio will limit your chances of approval for refinancing your home loan, and in the unlikely event it is approved, the terms are likely to be so costly that taking the refinance option would not be worthwhile.

Home Refinance Tip #3 Poor or bad credit rating

The single largest reason for denial of refinancing applications is poor or bad credit ratings. If you think your credit rating has declined since your first mortgage through late payments, or the fact that you had a little trouble paying some bills, put some effort into repairing it before you consider applying to refinance your home. Lenders look at your credit rating, so it pays to do your best to protect it

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