How To

How to Refinance Your Home and Save Money

By eHow Personal Finance Editor
Rate: (9 Ratings)

Interest rates are a moving target. If your mortgage's interest rate is considerably higher than current levels, consider refinancing to lower your monthly payments. You can also pull out cash to make a major purchase or pay for some needed remodeling.

From Quick Guide: Buy a Home
Difficulty: Moderate
Instructions
  1. Step 1

    See How to Shop for a Mortgage and How to Obtain a Home Equity Loan for a summary of the process.

  2. Step 2

    Ask yourself how long you're going to stay in your home. Divide the cost of refinancing by 12 to find out how many months you need to stay put for a refinance to be monetarily worthwhile. Typically you need to stay put for at least three years and secure a rate at least 1 percent lower in order for refinancing to make sense.

  3. Step 3

    Contact your current lender first if you've just purchased your home. With a recent appraisal on file, you may save closing costs and be able to move more quickly by working with the same mortgagor. Investigate online lenders as well.

  4. Step 4

    Pay attention to fees and closing costs, as with a first mortgage. These will include the cost of getting your house reappraised and may differ a great deal from one lender to another.

  5. Step 5

    Consider limiting the term to be no longer than what is left on your current mortgage, or you'll end up with much lower payments but a much longer mortgage.

Tips & Warnings
  • Have your tax returns, bank account statements, credit card statements, W-2s, brokerage account statements, title and purchase agreement, proof of home owner's insurance, taxes and other materials ready.
  • Lock in a rate while you complete your mortgage application.
  • Use the refinancing calculator on Bankrate to calculate potential savings (see Resources).

Comments  

cheapdave said

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