The Smart Way to Refinance Your Home Loan

Homeowners today have many options to refinance their homes and make real changes in their lives for the better. Mortgage refinancing is essentially a replacement of your current home loan with a new one. It can be a smart way to save money over the life of your loan by lowering your monthly payments.

Refinancing enables you to tap equity from an appreciating asset. Read on to get info about some important initial aspects of refinancing.

Refinancing a Mortgage- Step by Step Guide

Step 1

Identify your goals – is it to:

-Reduce monthly payments?

-Shorten the loan term?

-Get rid of FHA mortgage insurance?

Step 2

Shop for the best mortgage refinances rates while keeping an eye on fees.

Step 3

Apply for mortgages via three to five lenders. Submit all of your applications within two weeks. Doing this will reduce the impact on your credit score.

Step 4

Pick a refinance lender. To do this, compare the Loan Estimate document that each lender provides after you apply. Doing this will tell you how much cash you’ll need for closing costs.

Step 5

Now it’s time to lock your interest rate. Once you lock the interest rate, it can’t be changed.

Step 6

Close on the loan by paying the closing costs that were listed in the Loan Estimate and the Closing Disclosure.

Why and When You Should Refinance a Home

-Reduce your monthly payments

If your goal is to pay less every month, you should refinance into a loan with a lower interest rate.

-Tap into the equity

When you refinance to borrow more money than you owe, the lender will give you a check for the difference. This check is called a cash-out refinance.

-Pay off the loan faster

If you refinance from a thirty-year mortgage into a fifteen-year loan, you pay off the loan in half the time. This means you’ll pay less interest.

-Switch from an adjustable to a fixed-rate loan

Interest rates on adjustable-rate mortgages go up over time. Fixed-rate loans remain the same.