With mortgage rates at the lowest they’ve been in decades, now is as good a time as ever to refinance your mortgage. Whether you’re looking to decrease your monthly interest payments to take advantage of bathroom remodeling in Pennsylvania and finally renovate your master bedroom en suite, or are interested in using the money to finance an upcoming vacation, there are plenty of reasons to refinance. That being said, the refinancing process can be daunting, particularly considering how many hoops you must jump through just to get a mortgage in the first place. However, with a step by step guide to refinancing, you can take the appropriate actions and precautions to refinance your mortgage the right way.
Step 1: Find the best refinancing options
Once you’ve set your goal for why you’re refinancing your mortgage, it’s time to determine what options are out there. The rates you qualify for will vary depending on when you’re applying and whether or not you have a good credit score. While you’ll want to consider the monthly payment, it’s also worth taking a look at how interest rates affect the total amount of interest you’ll pay over the lifetime of the new mortgage. You’ll also want to weigh any other fees included in the transaction.
Step 2: Apply to several lenders
After you’ve evaluated which options are the best, it’s time to apply. Because you never know exactly what you’ll be paying until your application has been properly reviewed by the mortgage lender, it’s a good idea to apply to multiple options. This ensures that you get the best deal possible, and aren’t relying on an online estimate to make the right choice. If you’re worried about your credit score getting dinged, make sure to apply to each lender on the same day or in short order. That will help you avoid having more than one hard inquiry negatively affect your score.
Step 3: Pick the best choice
When you’ve formally submitted a few applications, you should get responses from each lender that clearly spell out the terms of conditions of your mortgage refinance. This will help you make the best choice possible, taking into consideration interest rates, any applicable fees, and what you’ll wind up paying over the lifetime of the new loan. Again, consider your overall financial goals as you weigh each mortgage option. While one mortgage may have an attractive monthly payment, if it comes with double the fees of another option, it may be worth considering the mortgage with lower fees. Ultimately, it all depends on your financial situation.
Step 4: Close the deal
After you’ve picked the right mortgage, it’s time to close the deal. This helps you lock in your interest rate so that you know that there won’t be any switches or other funny business over the course of the lending process. Closing a mortgage also involves home appraisals and other disclosures relevant to the new mortgage. Unlike closing on a home for the first time, a refinance often avoids in-depth home inspections. However, if you’re looking to get your home appraised at a different or higher value, it never hurts to run another home inspection to ensure that your property is properly valued.
Whether it’s to reduce your monthly budget or to tap into the equity of your home, refinancing your mortgage can be a great way to get closer to achieving your financial goals. Unlike the first time that you sign for a mortgage, refinancing your mortgage is a much simpler process. All it takes is a bit of leg work comparing various mortgage lenders and determining what you qualify for as a homeowner. Simply follow the above steps and ask your lender about any questions you might have, and you’ll be able to find success during the refinancing process.