Important Questions to Ask When Refinancing Your Home

• It may be difficult to know whether or not you should refinance your home mortgage. By doing so, you will pay off your existing loan and contract a new one. Ideally, the new loan should offer a lower monthly payment and interest rate than your current mortgage. In making this decision, you must consider a number of questions. Ask your lender what you need to know in order to make an informed choice.

Should I Refinance My Home?

• To decide whether or not you need to refinance your mortgage loan, you need to take a look at your financial situation. One indicator of whether or not refinancing is a good option for you would be to consider if your current monthly payment is a burden for you. Also, determine how long you have remaining before you pay off your mortgage and the interest rate compared to that on the market. Compare your current interest rate, your monthly payment and the number of payments that you have left to what you would get by refinancing.

Can I Qualify for a Refinancing Loan?

• Whether or not you qualify for refinancing will depend upon several factors. Lenders usually require you to have an accumulated equity of 10 percent in your home to refinance, according to MortgageLoan.com. They also will check and require a good credit score, which shows how responsible you have been with your debt payments. The amount of your income and debts will show your ability to pay the new mortgage. Assets and other property you have also help you to get approved for a refinancing loan.

How Much Will the Closing Costs Be?

• Closing costs are upfront payments required to complete the refinance of your loan. These costs include charges such as the appraisal fee, credit report fee, title insurance and prorated property tax, states MortgageLoan.com. They are generally two to five percent of the loan amount. For a break down of this information, ask your lender for a Good Faith Estimate (GFE), which details your settlement charges and loan terms.

How Long Will It Take Me To Pay Off the Refinancing Loan?

• Generally, your refinance may take 30 years to pay off, starting from when you sign your loan documents. However, depending upon your new mortgage terms and conditions, your financial situation and your current loan balance, it could take 10, 15, 20, 25 or 40 years, advises GetSmart.com.