Quick Tips on Refinancing Your Home
While it can be a bit tedious and even boring at times, the process of refinancing your home can be well worth it. Most people who go through this process lower their monthly payments by a few hundred dollars and wind up saving thousands in interest charges over the life of their loan.
Depending on what you do with the money you save by refinancing your home, you can also earn interest on that money or use it to pay off your mortgage early! But before you reach that point, let’s go over some quick tips to help you through this process.
First, understand that refinancing your home means setting aside or settling your original mortgage in exchange for a new one. This means that you need to qualify for refinancing. Even if you qualified for your original mortgage, things may have changed since then.
You may have blemishes on your credit record or changes to your earnings, or your lender may have changed their lending requirements. So refinancing your home isn’t always an automatic option. Your lender can tell you if you qualify or not.
Second, when refinancing your home you pay prepayment penalties for settling that original mortgage. You can check your current mortgage for what these penalties are. You’ll also pay closing costs similar to what you had for your original mortgage. It’s important to understand these costs so you know what’s expected of you when refinancing your home.
After you’ve reviewed your mortgage, you need to make an appointment with your lender. There is an application process you go through much like applying for your original loan. When refinancing your home your lender will ask for some documents such as proof of earnings and will need to have you set up a time for an appraisal.
They will also get a lot of paperwork on their own, such as your credit report and a title search. Your application will also go through their underwriters, which are people that just double-check the application and all the paperwork.
Through all of this, remember that your lender is supposed to help you through the process of refinancing your home. If you have questions about anything, such as your new interest rate or monthly payments, don’t hesitate to call and ask.
Make sure you understand the paperwork given you regarding your new loan as this agreement is just like your original mortgage – it can be somewhat complicated and difficult to understand. While refinancing your home may be the best financial decision you ever make, it may also be a very difficult one. So never hesitate to speak up and ask your lender a question if you have one.
After the underwriter has gone through the paperwork and application, the process of refinancing your home is typically complete. If you’re owed money due to equity in your home, this is when those funds are released. And now you have a new mortgage that saves you money!
