Within the post-financial crisis era, banking laws have become more tightly regulated. Lenders are now controlling how they allocate their loans and consumers must follow a specific process to achieve a loan they can afford. When refinancing a mortgage loan, it’s important to follow these new processes and to ensure the loan is affordable and suits your financial objectives for the near future. Our team at the Mortgages Diversified Team at Summit Mortgage Corporation, has decades of experience in the lending marketplace, and in this latest post, we’re highlighting our post-crisis tips for refinancing a mortgage loan.
The cause for the crisis
Before looking into how to ensure you achieve the best possible rate for the refinancing of your mortgage loan, let’s highlight three of the causes behind the financial crisis in the lending market:
- Few documentation requirements
Homebuyers were able to purchase homes with limited income verification and almost no background checks.
- Buyers with poor credit had market access
The subprime mortgage market allowed buyers with low credit to access the marketplace easily.
- Interest-only mortgages supported low initial down payments
The interest-only mortgage product allowed buyers to enter the marketplace with a low investment. The interest-only period expired after a few years, causing a meltdown within the financial marketplace.
The tips for refinancing your mortgage loan
With new regulations in place to protect the financial marketplace, here are our tips for refinancing a mortgage loan:
- Note: pre-approval instructions don’t make sense in the context of a refinance. Keep debt under control
Don’t take out any other loans when you’re in the process of refinancing a mortgage loan. Keep your loans under control and ensure you have the income to cover the expenditure.
- Discuss savings plans
Make sure that you have a significant amount of savings before the refinancing process. Keeping savings topped up can protect you against unforeseen changes in the marketplace.