Mortgage refinancing works similar to getting your first loan. It is a new contract that replaces your existing loan. It enables you to lower your monthly payment, save money on interest over the life of your loan, pay off your mortgage faster, and gain access to your home’s equity.
Process of Refinancing
1. Prepare the calculations
Before you refinance your mortgage, make sure that refinancing is a financially sensible decision for your scenario. You have to check your credit score to see whether you’re eligible for a new loan. Also, check to see if you have adequate equity in your house. Then, look at current interest rates. And, make sure the new payment will fit within your monthly budget.
2. Search for mortgage lenders
Take the time to examine mortgage refinance offers from a few different lenders. This may entail repeating the preapproval process, but the good news is that if numerous lenders check your credit in a short period of time, your credit score will not be affected.
3. Analyze quotations and loan terms
After you’ve decided on, submit an application. Here, the lender will look at your credit and financial status. Moreover, you may be requested for further information, so be ready to respond swiftly to these queries to keep the process going.
4. Apply
The Fed doesn’t set mortgage rates. However, its activities in determining the funds rate and managing the money supply have a substantial impact on borrowing rates. In general, expanding the money supply lowers rates, whereas reducing it raises them.
5. Check for interest rate lock in
Once you’ve been accepted, most lenders will let you lock in your interest rate. With a locked rate, your rate will remain constant. You can begin organizing your monthly budget after you’ve locked in because you’ll know exactly how much your payments will be.
6. Get a property evaluation
Your mortgage lender will have your home evaluated to ensure that it is worth enough to secure the new mortgage. You’ll have to pay for the evaluation as part of your closing costs.
7. Close on the loan
On closing, make sure to have all the documents your lender requires handy and be ready to pay closing costs.