Your Loan Options

Getting a new loan to refinance a mortgage can be just as difficult as getting a new purchase-money loan. The paperwork and the qualifying can be almost identical. So if you are going to go to all the trouble, as well as, the expense of getting a new loan, you should have some idea of what your loan options are.

For example, if you are self-employed it may not be easy for you to verify your income when it comes time to refinance your first mortgage. Lack of income verification does not mean that you can’t refinance a mortgage, but it may mean that you may be required to pay higher rates. Though special refinancing packages don’t require income verification, on account of the lack of tangible proof of earnings, almost always are accompanied by a sizable price tag. These increased fees translate into higher interest rates, as well as, increased equity in the property.

What’s your recent credit history like? Everyone goes through good and bad spells with their credit. If you happen to be in a bad spell at the time you need to refinance your mortgage it is best that you don’t attempt to hide anything from your lender.

It is possible to find lenders who will work with you on refinance your property even if you are having credit problems. Your loan might be classified as a sub-prime loan and, as such, you may pay a higher rate of interest than someone who has excellent credit. In addition, though it is possible to refinance a mortgage with less than ideal credit, your property may need more equity than otherwise would be required.

An important consideration when applying for a new loan to refinance a mortgage is how long you plan to live in the house. If your plans call for you to sell the house in a certain number of years, then you may want to consider any number of loans. Options may include: an interest-only loan or a balloon payment loan, both of which offer a lower initial interest rate for a set number of years.

If you plan to live in your home indefinitely and you want to keep monthly payments low, you may want to consider either a fixed-rate or a variable-rate 30-year mortgage or even one of the newer 40-year mortgages which reduce your monthly payments to an even greater degree.

Before applying for any loan it is advisable that you sit down and write out your goals and main objectives so that you can more clearly decide what type of loan is best for you and your particular situation.