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Mortgage Refinancing: Is This Your Time?

By: Allison Millar, Contributing Writer
In: Repair your home's value
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Mortgage rates have plunged in recent days, prompting many people who were sitting on the sideline to jump into the mix. Should you take the plunge yourself?

Managing the Mortgage Rate Craze

While it’s easy to get swept up in the mortgage rate craze–particularly after months of waiting on the sidelines for the economy to improve–you should take a step back and evaluate your financial strength. Here are three things to look at:

  • Credit Score. Your credit score dictates everything from your car insurance rate to how low the mortgage lenders can go on a loan. According to Bankrate.com, those with a credit score of 740 or higher get the best deals. Are you in that boat? Otherwise, expect to pay a little more. You need to decide if that “little more” is better than what you have.
  • Loan to Value Ratio. This has become more and more important in recent years, with many lenders looking for borrowers who owe less than 90 percent of their home values, says Wells Fargo. Defining your home value can be tricky, however, because foreclosures have pulled down values in some neighborhoods. Consider how well your neighborhood has fared. Higher home values obviously translate to good news for you.
  • Goals for Refinancing. Are you planning a home improvement project? Remember that kitchen and bathroom remodeling still produces the best return on investment, according to Quicken Loans. Before you start, think through the whole project to make sure you’re taking all the costs into account. With a home improvement project, have you added a 10 to 15 percent contingency to cover inevitable “surprises?” If not, add it now.

Mortgage refinancing remains a positive move for many home owners. Just make sure you consider all the financial factors and what your credit score and financial history can do for you.

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