Posted: 07/29/2016

The vote by Britain to exit the European Union has created a surge in refinance opportunities here in the states. So now might be the right time to seize the opportunity. But before you jump right into the refinance process thanks to Brexit, make sure you understand what variables go into it.

Here are the three most important variables affecting the type of refinance loan you can qualify for.

Your credit score

When you read or hear about your “credit score,” you’re really reading or hearing about what’s officially called your FICO score, a number from 350-850. Generally, the higher your score, the lower the interest rate lenders will offer, because a high score equates to a lower risk in the eyes of lenders.

More information on credit scores can be found in this 20-page PDF booklet addressing most questions about your score, including how it helps (and hurts) you, the difference between your score and your credit report, and how to read your score.

How much equity you have in your home

Home equity is calculated by the appraised, fair-market value of your home plus the claims against your home, such as the mortgage balance and/or liens. Home equity can change if the appraised value of your home increases or decreases. And as you make more mortgage payments and reduce the principal mortgage balance, equity may rise, depending upon appraised market value.

You may be able to use a portion of your home equity to pay for expected expenses, such as college tuition or home renovations, as well as for unexpected expenses, such as medical bills or extended periods of unemployment.

Your home’s appraised value

Because the fair-market value of your home affects the equity you have in your home, it also affects the amount lenders may be willing to lend you. For this reason, whether you’re buying a new home or refinancing your existing home, your lender will order a home appraisal to determine what the home is worth in the current market. A home appraisal is an assessment of a home to determine its fair market value. The appraisal is completed by a lender-approved, state-licensed professional who through analysis of the condition of the home, square footage, comparable sales in the area and many other considerations comes up with a proposed fair market value of your home.

A copy of the appraisal report should have been provided to you during the financing process of your home purchase.

If you have any questions about these variables, contact us today. A Guarantee Mortgage loan advisor will explain your options and help you figure out whether you can refinance, and whether it makes sense to refinance based on the estimated costs (if any), potential savings and when you would break even.

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