How Does Refinancing Work?
Everyone is talking about mortgage refinancing but is it for you (and what is it exactly?) Mortgage refinancing can put more money in your pocket and help you leverage equity. Success with mortgage refinancing starts with setting reasonable refinance goals and then comparing rates from various lenders to get your best deal.
Make a Goal
Why do you want to refinance? What is your main goal? The answers to these questions will vary depending on where you are with your current finances and goals. Are you looking to reduce your monthly mortgage payments? Are you interested in saving more money over the length of your loan by shortening the loan term? Are you interested in eliminating your mortgage insurance? Decide what your main goal is for refinancing and then go from there with your decision-making and planning.
Start Shopping for Your Best Mortgage Refinance Rate
Refinancing requires some study. Know what mortgage refinance rates are so you can know if refinancing is for you AND which lender has your best interests in mind. (Don’t forget to factor in lenders’ fees when determining the best package.)
Apply for a refinance loan (to 3-5 lenders)
Refinancing a loan successfully means comparing rates and loan packages from a few different lenders to ensure that you are getting a competitive deal. Make sure to turn in all of your applications within a two-week period to minimize the impact on your credit score.
Select Your Best Loan Package/Lender
When it comes to selecting the best loan package, compare the different loan estimate documents your lenders will give you to see which makes the most financial sense for your particular situation. (These documents should also disclose how much to plan for your closing costs).
Lock Your Rate
A key part of getting a great deal on a loan refinancing package hinges on your interest rate; you want to lock in while it is low. The lock period varies and will end on a specified, predetermined date that you and your lender will establish. The goal is to close on the loan before that lock date so you can keep the interest rate you were expecting.
Close-out the Loan
The closing process involved in refinancing will include closing costs and fees just like when you purchased a home. (Take the time to nail-down what your closing costs and fees will be BEFORE you sign the dotted line to make sure your refinance package is what you need/want for better financial health.
Not All Refinancing Options Are the Same – Shop Around!
When it comes to refinancing your home mortgage, not all packages are the same; not all lenders will offer the same interest rates or deals. Make sure you examine all your lending options to uncover your best rate and the best terms.
Seek out a few quotes before inquiring with your current lender. See what kind of rates you can get from competitors before inquiring with your current lender about refinancing. This will help you negotiate better terms with your current lender.
Lending Studios is here to assist homeowners to determine their eligibility for loan refinancing. Our mortgage calculators are a great tool to gauge your readiness for particular types of lending products: