How could you smartly refinance your home loan in 2011?

As the mortgage rates keep on fluctuating, there are many homeowners who are confused about whether to refinance their home loan and save a considerable amount of money. If you too are going through dire financial straits and are unable to arrange the high monthly payments on your current mortgage loan, you can certainly seek help of a refinance loan. Getting informed about the present refinance rates is very important before taking a plunge into the refinance bandwagon. A small mistake could cost you dollars in the long run. Therefore, you need to know about the vital steps that you need to take to refinance your mortgage loan in 2011.

1.Know your home value and compare it to what you owe on the home loan

While you’re about to consider a refinance, you must be having a clear idea of the how much money you owe on your house. If you still do not remember, you can check the last statement from the mortgage company. As you come to know this amount, you need to determine how much your house if worth. You may ask a real estate broker to get to know about the average estimate of your house. Divide the home value by the amount you owe on the home loan and see what percentage of the home value you owe to the lender. This will be your loan to value ratio which is necessary before refinancing your mortgage loan.

2.Determine whether or not you have any other lien

The second thing that you need to determine is whether or not you have a second lien that is a home equity loan or a line of credit. If you have, you can add that amount to the main mortgage loan. As you get the total amount, you need to divide it by the estimated value of the home. This will help you determine the total loan to value ratio and use it to calculate the amount that you need to pay to your lender. Also calculate the monthly payment that you require paying and check your affordability so that you do not default on your refinanced loan.

3.Call your lender and know the current refinance rates

As you’re done with your calculation, you must call your lender and ask for the refinance rates. Though you can make an online search to get the present mortgage rates, yet you must also check whether or not the lender is true to his business. Call your lender and negotiate regarding a refinance loan. Check the interest rates, repayment term and the monthly payments so that you can evaluate whether or not you’ll be easily able to make the repayments.

Thus, if you’re a prospective homeowner for refinancing your home loan, get to know the current refinance rates so that you can strike the best deal while refinancing your home loan. Make sure that you do not default on your monthly payments after refinancing and help maintain your credit score.