Guide To Refinancing Your Mortgage

Remember the mortgage you applied for when you purchased your new home? The money from this loan was transferred to the seller before they handed you the keys. Refinancing works pretty much the same way, except this time the money will help you pay off that mortgage, and get a new mortgage (hopefully, one with better terms). Once you’ve made up your mind to tackle the refinance process, here’s how to go about it.

Figure out Your Goal

Knowing why you want to refinance your mortgage will guide your decisions involved in the process. If you’re aiming to reduce monthly payments, you can refinance into a loan with a lower rate of interest. Other reasons people choose to refinance is to switch from an adjustable-rate to a fixed-rate loan, pay off the loan faster, get a cash-out refinance, or do away with FHA mortgage insurance.

Find the Best Mortgage Refinance Rates

Once you share your basic information, every potential lender is required to give you an estimate within three days. This three-page document will include details of the loan terms, projected payments, and estimated closing costs, along with other fees. When shopping for the best refinance rate, remember to use a mortgage refinance calculator, compare offers from each lender, and keep an eye on the fees, too.

Apply for A Mortgage with At Least Three Lenders

You can go up to five, but make sure to submit all applications within two weeks. This will minimize the impact of hard pulls on your credit score.

Pick the Best Offer

Compare the Loan Estimate document you’ll receive from each lender after application. This document will give you an idea of how much cash you’ll be paying for closing costs. Choose the lender who gives you the best deal.

Make Sure to Lock in The Interest Rate

By locking the interest rate, you ensure that it can’t be changed for a specified period. As a result, both you and the lender will attempt to close the loan before the rate lock lapses.

Sign the Dotted Line

Closing is the last step of the refinance process. This is when you’ll be required to pay those closing costs you agreed to. It’s a lot like closing a purchase mortgage, with one main difference – you won’t be handed a set of keys this time.