5 Questions To Ask Yourself Before Refinancing

Are you considering refinancing your home? With the current relativity low mortgage interest rates, now may be the perfect time to refinance your home. Before you decide whether to refinance or not, there are some questions you should ask yourself before you start the process. MHQ Mortgage HeadQuarters has put together a list of five helpful questions to ask yourself before refinancing your home. 


1. How Much Equity Do You Have in Your Home?

Typically, homeowners need to have 20% equity established in their home to avoid paying private mortgage insurance. Private mortgage insurance is what lenders require if you take a mortgage or refinance without having a 20% down payment or equity. PMI is what protects the lender if the borrower defaults on their loan. 

If you do not have 20% equity in your home, it might not be a good time to refinance. If your goal of refinancing is to lower your monthly payment, it might be counterproductive if you are required to pay personal mortgage insurance.

Even if you don't have 20% equity, you can still apply to refinance. There are still a few options for you if you have low equity, such as a FHA loan. If you have any questions or would like to apply to refinance your home MHQ Mortgage HeadQuarters would love to help you through the process. The only way to know for sure if you qualify is to contact a lender.

2. Why Do You Want to Refinance?

Before you decide to refinance your home, you need establish clear goals on what you hope to accomplish by refinancing. Do you want to lower your monthly payment? Are you hoping to shorten the term length of your mortgage? Do you want to switch form an ARM (adjustable-rate mortgage) to a fixed rate? 

After you decide what your purpose is, make sure to keep your goal in mind so you can make the best decision. Refinancing can be beneficial, but if you don't set goals you could end up in a worse situation than you are with your current mortgage.

3. Can You Afford to Refinance?

There are costs associated with refinancing you may not have considered. You will have to pay closing costs to the lender for things such as an appraisal and home inspection. These fees could cost you thousands of dollars. If your goal is to lower your monthly payment, it could take several years to offset those costs. If you are not planning to stay in your home long-term, refinancing may not be the best option. However, if you are planning to stay in your home for years to come, refinancing could save you a lot of money long-term. Closing costs could be a minimal expense compared to how much you will spend on your current mortgage terms over an extended period.

4. What Is Your Credit Score? 

 Your credit score plays a big role in refinancing, just like it did when you took out your first mortgage. Borrowers with a 720 or higher typically do not have a problem taking out a mortgage, if they qualify in all other aspects of the mortgage application process. You do not have to have a 720 credit score to qualify to refinance, but the higher your credit score the better rates you will qualify for. 

5. What Are the Terms Of Your Current Mortgage? 


It is possible that there is a prepayment penalty on your current mortgage. When you refinance, you are paying off your current mortgage. Check to see what the conditions are of your current loan. Add the prepayment penalty to your other cost of refinancing to get an accurate figure on what your total cost to refinance will be.

Refinancing your home can save you money in the future and help you to achieve your financial goals. If you have any questions about refinancing your home at the Lake of the Ozarks, feel free to contact us! MHQ Mortgage HeadQuarters are your mortgage professionals at the Lake of the Ozarks and would be happy to assist you in refinancing your home.     


Mortgage Headquarters of Missouri, Inc
4824 Osage Beach Parkway, Suite 1
Osage Beach, MO 65065

Office: (573) 302-9990
Toll Free: (888)799-1206
Fax: (636)648-9917
Email: info@mhqmortgage.com

NMLS # 1229111




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Location: Osage Beach, MO 65065, USA

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