A step-by-step process of mortgage refinance
A mortgage refinance is a process where a person pays off an existing mortgage with a new one. The new mortgage will have better terms, a lower interest rate, and other advantages. That said, the mortgage refinance procedure can be daunting, especially for those who have never been through it before. If someone is considering it for the first time, they can simplify things by breaking down the process into smaller steps.
Step 1 – Know your goal
It is important to know why you are refinancing the mortgage for. Either aim for maintaining the current loan term while you lower the interest rate or shorten the loan term.
Step 2 – Know your credit score
Check your current score as a better score will help you receive better interest rates for mortgage refinance.
Step 3 – 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.
Step 4 – Get the best mortgage rate
First, compare the rates of mortgage refinance online. Shopping for rates online is a preferred 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.
Step 5 – know the all-in costs
A mortgage refinance may come with numerous fees – from application fee to document processing fee; from appraisal cost to underwriting fee, there are a bunch of costs to be taken care of.
Step 6 – Gather paperwork
This might be time-consuming, but you will need to gather important paperwork required for during the refinance process.
Step 7 – 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 any period before closing the deal.
Step 8 – Keep some extra cash
There might be extra closing costs, which would be listed in the loan estimate. That’s why keep some extra cash on hand. In some instances, these extra costs would be added to the mortgage balance, which helps in reducing the upfront costs but increases the amount you owe on your house.
