A step-by-step process of mortgage refinance

A mortgage refinance is 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 mortgage refinance procedure can be a bit daunting but here we have a simplified, step-by-step process for you.

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.

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