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Refinancing can be a great option for many homeowners. That said, if this is your first time considering a mortgage refi, then a quick overview of the mortgage refinancing process can’t hurt. In this article, we have broken down the entire process to ensure your home loan refinance goes smoothly.
Refinancing a mortgage is a rather straightforward process that generally involves taking out a new loan to pay off your original home loan. By choosing to refinance, you can take advantage of lower interest rates, cash out a portion of your home’s equity, or simply reduce your monthly mortgage payment with a longer repayment term, plus more. Thus, by having a better understanding of what it means to refinance your mortgage, not only can you figure out which refi route works best for you and your situation, but you can also decide if refinancing right now is your best option.
Refinancing your mortgage in effect erases the debt on your current home loan. Here, you can effectively choose the best rate, loan type, and terms for your new mortgage, which in turn can save you money and help you reach your other fiscal goals.
Overall, the refinancing process is not too different from when you first obtained your home loan or went through the full mortgage application process. In other words, you would essentially start the process by shopping around, comparing interest rates, and more. Once you have found a few lenders or mortgage companies (and/or check out your current lender’s rates and terms), then you can compare those offers with the terms of your existing home loan. As you go through the required steps of refinancing your mortgage, make sure you keep any changes in your credit score/financial situation and possible closing costs in mind. It is also a good idea to watch out for things that could cause problems down the road if you pay off the mortgage early or refinance again.
To ensure that the process of refinancing your mortgage runs smoothly, there are a few things you can do. For starters, it is definitely beneficial to ask yourself if refinancing is the right step. There are a lot of people who assume that a mortgage refinance is a financial win-win that doesn’t come with any added costs. In reality, going through the refinancing process will lead to another closing, and when this happens, there will be closing costs that must be considered. So it is important to keep that in mind and make sure that the money saved on interest payments will be enough to offset these costs. Note, a refi calculator can help you figure out your savings beforehand.
Once you have decided that refinancing is right for you, then the very first step should be adequately considering the top three types of refinance loans— cash-out, no cash-out, or rate-and-term loan. Subsequently, take a look at your credit score and make sure that your credit report is accurate—this will help to ensure that you can qualify for low rates no matter which loan type you choose.
Next, you should see how much is left to pay on your current mortgage and while you are at it, make sure to get an estimate of your home’s value, or rather, a current appraisal. This is especially important if you are looking to cash out some of your home’s equity. As suggested above, your lender may require a home appraisal as part of the refinance approval process. You should also inform your lender of the home repairs and improvements you have made since you purchased your home—as they might very well increase your home’s market value.
Finally, many people are going to be going through the refinance process for the first time. It is important to work with a trained professional who can walk everyone through this process, ensuring that they know what they are doing as the process unfolds. This can go a long way toward ensuring that everyone has a successful refinancing experience.
Ultimately, following these steps can maximize everyone’s chances of making sure they end up with a refinance that works for them. By planning out the process ahead of time, everyone can go through the steps they need to make sure that the refinancing process proceeds as smoothly as possible.
Are you curious about mortgages, or are you ready to refinance your current home loan? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.
You may be able to get rid of that expensive mortgage insurance without refinancing if your loan is in good standing, and it was opened before June 2013, among other requirements.
A possible better rate is one of the advantages of refinancing to a shorter mortgage. But that doesn’t mean you should shorten your mortgage without doing your homework first.