A Step-by-step Process Explaining Mortgage Refinance
A mortgage refinance is the process of paying off the existing loan and substituting it with a new one. Refinancing can help in lowering interest rates, shortening the loan term, or consolidating a debt. The procedure can be daunting but here we have a simplified process for you.
- Know your goal
It is important to know the reason why you are refinancing the mortgage. Accordingly, either aim for maintaining the current loan term while you lower the interest rate or shorten the loan term.
- Know your credit score
Check your current score as a better score will help you receive better interest rates for mortgage refinance.
- Research about the current value of your house
Look for the sale of houses in your neighbourhood to gauge the current price of your home.
- Get the best mortgage rate
First, compare the rates of mortgage refinancing online. Shopping for rates online is a preferable choice, but make sure that you shorten the length of the loan application period to two weeks in order to reduce the impact on your overall credit score.
- Know the total costs
A mortgage refinance may come with numerous fees — from application fees to document processing fees, appraisal costs to underwriting fees, there are a bunch of costs to be taken care of.
- Gather paperwork
This might be time-consuming, but you will need to gather important paperwork required during the refinance process beforehand.
- Lock in your mortgage refinance rate
It is important to decide when to lock in the rate of the mortgage refinance so that the rate can’t be changed during the period before closing the deal.
- Keep some extra cash
There might be extra closing costs listed in the loan estimate, making it advisable to keep some extra cash on hand. In some instances, these extra costs will be added to the mortgage balance, which helps in reducing the upfront costs but increases the amount you owe on your house.