How to Refinance

Refinancing home mortgages may mean paying off your existing mortgage with a new loan. Many home owners are considering refinancing for various reasons. Common reasons are getting a better rate from high adjustable interest to a lower fixed interest – or even refinancing after bankruptcy. This can also be a way for home owners to have lower monthly payments or take out cash against their home equity to support urgent financial needs.

Steps to Refinance a Home Mortgage

  1. The first step is to determine if you are qualified to refinance. Lenders allow refinancing when you made at least 12months of payment to your mortgage. Know your reasons why you should refinance. Your reasons will help you decide on the right time to apply.
  2. After your reasons are established and you finally decide that refinancing is your only option, talk to your lender. Your lender may give you flexible terms in refinancing. They may even waive some refinancing fees and other costs involve. You can get sufficient guidelines and assistance on how to refinance your home. Your original lender can extend services beyond their limitation to keep their existing customers so it is best to approach them first. If you feel you are not getting the right service from your current lender then you may opt to change lenders.
  3. Find a lender who can offer the best mortgage deals in refinancing.
    1. Banks. Talk to your bank as they are already familiar with your credit history. They may offer you flexible terms and interest rates too.
    2. Mortgage broker. They are the best people who have access to various lenders. They can refer you to a lender who can offer the best deals in refinancing.
  4. In your search for lenders, it may be difficult to pinpoint the best and reliable lender. Compare lenders according to how much savings you are going to get against the total costs. It is also important to consider the costs of refinancing against sticking to your original loan. Remember that there are penalties involved if you decide to refinance your home. So if costs are greater than rewards, it may be better to stick to your original loan.
  5. When you are decided on a lender, go through the application process. You may apply online, through the phone or through paper application. Your loan officer will have to review your credit score and appraise your property as a requirement to the application process. You have to provide them documents as proof of verifiable income. These documents are W2s, pay-stubs or copies of tax returns for self employed individuals.

Your application may process in a maximum of 4 weeks given that your papers are complete and there are no problems with your credit score. To avoid hassles and delays, let the bank or the lender know if you have a home equity line of credit or an existing second mortgage that you plan to keep. If this is the case, there may be additional documents involve such as a subordination agreement from your existing lender.


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