The majority of mortgages in America come with a 30-year term. A lot can happen in 30 years, so it’s not surprising that many homeowners consider refinancing their mortgage. Following changes in your financial situation, your personal life, your professional life, or your life goals, you may wonder if refinancing would be a good move for you and your family. But do you know how to refinance your home?
How to Refinance Your Home
Refinancing doesn’t mean that you alter your existing home loan (source). Instead, you replace it with a brand new one. To do that, you’ll need to think about your goals, check your financial situation, and decide which loan product is the best fit for your unique situation. Then, you’ll need to assemble the necessary documentation and get approved before preparing for closing.
Determine Your Goal
Why do you want to refinance? Pinpointing your motivation for refinancing may help inform your decision-making, making it easier to choose an option that matches your goals. As Investopedia makes clear, homeowners choose to refinance for a multitude of reasons:
- To save money by securing a lower interest rate
- To switch from an adjustable-rate mortgage to a fixed-rate mortgage
- To shorten a loan’s term
- To access equity to get cash
- To consolidate debt
Check Your Credit
Savvy homebuyers know to shine up their credit before applying for a mortgage. As Credit.com reports, it’s smart to check your credit and do any necessary polishing before you refinance for the exact same reason. If your financial situation has improved since you secured your existing mortgage, refinancing might give you a chance to secure a loan with improved terms. If your financial situation is unchanged, you may still be able to snag a better interest rate if rates have dropped since you closed on your home purchase.
Explore the Possibilities
As NerdWallet points out, a wide range of refinancing options is available, and each option comes with its own pros and cons. Where can you get a lower interest rate? Should you extend the term of your mortgage to secure a lower payment? Would it be better to refinance with a loan with a shorter term and lower interest rate in hopes of reducing the overall cost of your loan? Could one of the many government-sponsored loan programs be a good fit for your needs? How much will it cost you to refinance?
With so many factors to consider, sorting through your options can be a challenge, so it’s smart to reach out to a reputable lender for input. At PrimeLending, we thrive on matching people with the right loan product. We would be happy to educate you on how to refinance your home, to help you explore your options, and to guide you through the application process.
Gather the Paperwork Needed
Whenever you apply for a loan, there will be paperwork. The exact requirements vary slightly depending on your circumstances and the refinancing program that you choose, but it’s a good idea to go ahead and assemble some basic documentation. According to The Mortgage Reports, you should have things like recent pay stubs, tax documents for the last two years, recent asset statements, documentation of any debts not appearing on your credit report, and letters to explain any employment gaps or credit issues.
Prepare for Closing
Getting approved doesn’t put an end to the paperwork (source). Since you are basically taking out a new loan, you’ll need to review and sign a new set of loan documents. What about closing costs? They might be rolled into your new loan. Alternately, if you’re cashing in on your equity, closing costs may be deducted from those funds. If not, you may need to bring a check to your closing to cover closing costs.
Do you still have questions about how to refinance your home? Are you wondering whether refinancing makes sense for your unique situation? At PrimeLending of Springfield, Missouri, our team of home loan experts focuses on making every step of the refinancing process simple, transparent, and rewarding. With our expertise and commitment to clear and timely communication, we can guide you through the process from application to closing. To get started, please call 417-616-0777 or contact us online. We look forward to helping you save money!