Refinance Your Mortgage

Amanda Peterson

August 9, 2023  •  2 Minute Read

Money Saving Tips

Wise Spend Wednesday this week talks about being financially responsible. If you have a mortgage, and have had it for a while, try looking into refinancing it to get a better interest rate and lower the monthly payment.

Refinancing a mortgage involves replacing your current home loan with a new one, typically to obtain better terms, lower interest rates, or change the loan duration. People choose to refinance for various reasons, such as reducing monthly payments, paying off the loan faster, or accessing equity for other financial needs.

Here are some steps you might consider when refinancing your mortgage:

Assess Your Financial Situation: Determine why you want to refinance. Are you looking to reduce your monthly payments, pay off the loan faster, or take advantage of lower interest rates?

Check Your Credit Score: A higher credit score often results in better refinancing offers. Make sure your credit score is in good shape before applying.

Research Mortgage Rates: Compare current mortgage rates to see if they're lower than what you're currently paying. Keep in mind that rates can vary depending on your creditworthiness, loan amount, and the market.

Gather Necessary Documents: Just like with your initial mortgage, you'll need to provide financial documents to your lender, including proof of income, assets, and credit history.

Calculate Costs: Refinancing comes with costs such as application fees, appraisal fees, and potentially closing costs. Make sure the potential savings from refinancing outweigh these costs.

Shop Around: Don't settle for the first offer you receive. Different lenders might have varying terms and rates, so it's wise to get quotes from multiple sources. Keep in mind - be cautious of how many you apply for. This could be detrimental to your credit report. Don't run applications until you know for certain which lender you are going to work with.

Submit Applications: Once you've selected a lender, submit your application for refinancing. Be prepared to provide all necessary documents.

Appraisal: Your lender might require a new appraisal of your property to determine its current value.

Underwriting: The lender will review your application, documents, and property appraisal to assess the risk and determine if you qualify for the new loan.

Approval and Closing: If your application is approved, you'll receive a loan estimate detailing the terms of the new mortgage. Review it carefully before closing. Once you're satisfied, you'll attend a closing similar to when you originally purchased the home.

Start Repaying the New Loan: After closing, you'll begin making payments on the new mortgage according to the terms you agreed upon.

At The End Of The Day

Remember that refinancing might not always be the best choice, depending on your individual circumstances. It's essential to carefully evaluate the costs and benefits before proceeding. If you're unsure, consider consulting with a financial advisor or mortgage professional to make an informed decision.

And remember to keep following CreditSoup.com for more weekly credit tips!