Refinancing Is Not As Complicated As Some Homeowners Believe

Although mortgage rates have begun to rise somewhat in the second half of 2016, they continue to remain near historic lows, making it a great time to consider refinancing your loan. The process may seem daunting, and it does include several steps, but those willing to engage in the process can likely expect a new loan with better terms. This typically means lower monthly payments, a speedier payoff, or perhaps both.

To begin the refinance discussion with your lender, ask whether there are any upfront fees. Most refinances come at a cost of several thousand dollars, so you’ll want to ensure that your refinanced monthly payment savings will offset that cost going forward. Your lender should be able to provide you with a cost-benefit analysis that takes into account the time remaining on your current loan, the size of your loan and the mortgage rate you qualify for. If the numbers don’t work in your favor, it’s probably not the right time to refinance, and you can always choose to forego the process.

As with your original home loan, a refinance requires a standard mortgage application. Your lender will discuss the loan options with you, and once you choose you’ll be required to provide financial documentation. This will likely include bank statements and pay stubs.

After you have completed the application, the lender will begin the mortgage underwriting process. The company will evaluate your financial situation to determine whether to assume the risk of your new loan. If you’re approved, the closing process will begin. Similar to your original home purchase, this refinance closing process will ensure your new loan is applied to pay off the old one, and your new loan will become active. At this point, your monthly payments will now be applied to the new loan.

As with any loan application process, it’s prudent to shop around for the best terms available to you. Be sure to meet with several lenders, and ask about any special re-fi offers that may be available.

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