How to Refinance Your Home and Save Money

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By eHow Contributing Writer

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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.

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Difficulty: Moderate

Instructions

Step 1

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

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cheapdave said

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