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5 Steps to Refinance Your Mortgage
Are you feeling stuck in your current mortgage situation? Is your monthly interest payment too high? If so, you’re not alone – refinancing is one of the most popular strategies for saving money on your mortgage.
However, refinancing can be a complex process, so it’s important to take the time to plan ahead and make sure you’re doing everything correctly. But before you get started, there are a few things we should go over.
What does it mean to refinance your mortgage?
When you refinance your mortgage, you are essentially taking out a new loan to pay off your existing mortgage. This new loan will have terms that differ from your previous mortgages, such as a lower interest rate, a longer loan period, or both.
Refinancing can be a great way to save money on your monthly mortgage payments and it can also help you pay off your mortgage faster!
When should you refinance your mortgage?
When interest rates drop
If interest rates have dropped since you originally took out your mortgage, it could make sense to refinance to get a lower rate. This could save you money in the long run, as you’ll end up paying less interest on your mortgage loan.
When you want lower monthly payments
If you’re having a hard time paying your mortgage on a monthly basis, then refinancing can be a good option. By refinancing to a lower interest rate or extending the term of your loan, you’ll be able to save money every month.
When you want to cash out equity from your home
If you’ve been diligently making payments on your mortgage, chances are you now have some equity built up in your home. Refinancing allows you to tap into this equity and use it for other purposes, like home upgrades and debt repayment.
When you want to pay off your loan sooner
If you’re looking to become mortgage-free sooner, refinancing into a shorter-term loan could be a good option. This will likely mean higher monthly payments, but you’ll pay off your loan more quickly!
Should I refinance my mortgage?
Understanding your goals for refinancing allows you to take advantage of saving money on your mortgage payments. Furthermore, having a solid plan in place will help you make the most out of refinancing and avoid any potential issues in the future.
So if you feel like any of the reasons mentioned above pertain to you, then refinancing may be the right option for you.
In this post, we’ll walk you through five steps to refinancing your mortgage to help make the process as smooth and stress-free as possible!
1. Know your credit score & home equity
Your credit score is one of the most important factors in determining whether or not you qualify for a refinance. Lenders will use your credit score to determine your risk level and whether or not you’re likely to default on your loan.
The higher your credit score, the better chance you will be eligible for a lower interest rate. You can check your credit score for free online or through your credit card company or bank.
Another factor that will affect your ability to refinance is your home’s equity. Equity is the portion of your home’s value that you own outright. To qualify for a refinance, you’ll need to have enough equity in your home to cover the cost of the new loan.
2. Shop around for the best rate
Once you’ve determined your credit score and home’s equity, it’s time to start looking around for the best refinance rate. With so many different lenders out there, it’s important to compare rates and terms from multiple lenders to get the best offer.
Don’t just focus on the interest rate – also look at the fees and closing costs associated with each loan. To estimate your monthly payments and compare loans side by side, you can use a mortgage refinance calculator.
3. Get Pre-Approved for a Loan
Once you’ve found the best home loan refinance, it’s time to get pre-approved for a loan. Getting pre-approved will give you a better idea of how much money you can borrow and what your monthly payments will be.
Pre-approval gives you a conditional commitment from the mortgage lender for a specific loan amount, allowing you to move forward with your home purchase knowing that your financing is in place.
4. Apply for the Loan
Once you’ve been pre-approved, it’s time to apply for the home loan refinance. This is where you will need to get your financial documents in order. It shows the lender that you’re a responsible borrower and have the financial resources to cover your mortgage payments.
The process will vary depending on the mortgage lender, but generally, you’ll fill out an online application and then submit supporting documentation about your income, debts, and assets.
5. Close on your loan
After your home loan refinance is approved, it’s time to close on it. This involves signing a bunch of paperwork and paying any closing costs. Once everything is finalized, your new loan will be in place and you can start saving money.
Takeaway
If you’re thinking about refinancing your mortgage, these five steps will help you get the process started. Just be sure to do your research and compare rates and terms from multiple lenders before making a final decision!
For more information on refinancing and to connect with 1st Eagle Mortgage, visit our homepage.
February 15th, 2022 by Herb Levin
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