Refinancing your mortgage can be a great way to pay it off quicker, which in turn can help you save money to help you pay off other debts. You may do this in order to save money, purchase a second home or getting another large investment, such as a car. Whatever your reason for making this decision, it is important to make sure your finances are in order.
Like applying for any type of loan, you will need to have a pristine credit score to ensure that you can get your mortgage refinanced. If you are in the process of repairing your credit score and gearing up to apply for refinancing, you should avoid these mistakes:
- Opening new lines of credit
- Using credit to pay for your debt
- Missing credit card payments
Bypassing these financial risks will be helpful, but you also can repair your score using these methods:
Check out your credit report
As you are researching interest rates and other components of refinancing, inspect your credit report. This document will have an expanded review of your credit, from your history of late payments to all of your open accounts. Using your report as a guide can allow you to see what accounts have the highest interest and make sure you are making payments on time.
Pay off other debts
You can expect your monthly mortgage payments to decrease after refinancing your loan. However, you will still be responsible for any other debts you owe. Paying down these debts will help lower your credit utilization ratio, which will then help increase your credit score. When possible, focus on paying down accounts with the highest interest rate to save you money in the long term.
One of the most important things in this situation is to be patient. Repairing your credit and waiting for market interest rates to lower takes time. Just continue to make your payments on time and whittle down your debts as much as you can, and you will see your score rise in no time.