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7 Steps to follow while refinancing your current mortgage

Posted on: 13th Sep, 2004 01:01 am

Refinancing is a good option that can help you to get rid of high interest debts. But you can only benefit from it if you can secure a lower rate on your loan and also make minimum payments to the lender. You can try shopping for some of the best rates and costs while you are into refinancing. Besides, an awareness of the entire loan process also helps you get through the deal easily. This article contains an overview of the refinance process in simple steps so that it will be easier for you to interpret what the process is all about.


Steps to follow:

  1. Decide how long you are going to stay in the property.

  2. Contact your first lender and find out what he has to offer. Otherwise start shopping with other lenders.

  3. Get pre-qualified for the loan
    • Decide upon the type of mortgage

    • Check out the factors that may influence the interest rate on your loan. These are:
      1. Your credit score.
      2. Loan amount.
      3. Number of points paid.
      4. Lock-in-rate.

  4. Compare the interest rate on offer with that of your existing loan.

  5. Get pre-approved with a lender.
    • Calculate the monthly loan payments

    • Subtract new payments from current monthly payments. The difference gives you the savings that you can earn by getting a low rate.

    • Divide the monthly savings by the total closing costs. That gives you the number of months within which you can recover the closing costs. This time period is known as the Break-even period.

    • Compare the months obtained with the time period you're staying in the house. If it exceeds the time period, then refinancing may be a good choice.

  6. Follow the simple steps that will take you to loan closing, that is, towards finalizing the deal.

  7. At closing time you'll have to sign the loan documents and the mortgage note. Besides, you will have to pay for the closing costs and prepayment penalty.

Related Readings
Hi KC,

One can refinance the mortgage provided he or she has equity in it. If you have equity in your property, then you should contact your lender and apply for a refinance. Apart from that, you should have a stable financial situation and required credit scores in order to get a loan.

Thanks
Posted on: 23rd Feb, 2011 11:09 pm
First, property taxes have nothing to do with your mortgage. If you escrow property taxes and taxes go up, so will your monthly payments.

The main criteria regarding whether or not to refinance should be does it make financial sense and not the number of times you do it.

If it puts you in a better financial position or solves a financial problem then refinance. The key is to know how to determine if that will be the outcome.

To get a specific answer you would need to provide details on your current loan/property value plus any credit problems, credit scores and employment status.

Just saying if you have equity to contact your lender and apply for a refinance is bad advice that could end up costing you a considerable amount of money. Do your homework and compare what's available and what you qualify for before making a final decision.
Posted on: 24th Feb, 2011 11:49 pm
My mortgage loan is with a private lender, will this make it harder to get refinanced and will the process be the same.
Posted on: 06th Feb, 2013 06:38 am
Hi Richie!

Welcome to forums!

You may face difficulty in getting a refinance if you don't have a lump sum equity in your property to refinance the loan.

Feel free to ask if you've further queries.

Sussane
Posted on: 06th Feb, 2013 10:33 pm
i am paying on a loan (a 10 year refinance from 5/6/10, at 3.99%. i only owe 87,962 on my loan, and i make about an $100 extra payment each month-so i pay $1300 to my loan monthly. the new offer is to refinance at 2.75%, for a 10 year term, but there are about $1500 in closing costs, and they want to roll them into the loan, making the balance actually a bit higher. i can pay the costs outright. your recommendation, please.
Posted on: 09th Mar, 2013 09:41 am
Hi Guest,

If you can pay the closing costs outright, then you can go ahead and do that rather than rolling the closing costs in your loan. If you pay the closing costs outright, then your loan balance won't be higher.
Posted on: 10th Mar, 2013 10:29 pm
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