Close inactive credit card accounts to improve your credit score, making you eligible for lower interest rate loans. You will need to notify the credit card companies in writing that you wish the accounts closed on your request. Next, check your credit report after 30 days to be sure closed accounts include the comment "Closed at Customer's Request." You want future lenders to know it was your request and not bad credit that closed your accounts. Also, take the time to check for any mistakes in your credit report that could negatively impact your credit score.
For both new buyers and refinancers, it's important to understand what a no-cost mortgage loan or a no-cost refinance loan really means. "No cost" does not mean that closing costs (also known as settlement costs) have been erased. It means that the closing costs will be factored into the interest rate associated with the loan. Of course, this also means that, all other things being equal, the interest rate associated with a no-cost mortgage will always be higher than one where the borrower pays the closing costs up front.
If you know that you will be moving in 3 to 5 years, you might want to consider refinancing to a 3 or 5 year ARM (adjustable rate mortgage). These loans typically have a much lower rate that a traditional fixed rate loan such as a 30 year fixed, but they do have a fixed rate for the first 3 or 5 years of the loan. This will enable you to benefit from the lower rate, but you won't ever have to worry about the risk of a rate adjustment because you will be selling the home before the fixed-rate period ends.
Get your interest rate and closing costs in writing as soon as you decide on a lender to work with. Get your lender to give you a commitment in advance of all of the costs that will be involved with your loan. Find out if the refinance loan you are getting has a pre-payment penalty as well. Sometimes lenders will leave out important information like this, if they think it might scare you away from refinancing with them.
Unless you are getting a lower interest rate, refinancing your home may cost you more money in the long run and may require you to pay higher monthly payments.
