How to Refinance

There are many reasons to refinance your mortgage, including lowering your monthly payments, lowering your interest rate, or consolidating a first and second mortgage. There are several options available to homeowners now because of the access to brick and mortar banks as well as online mortgage lenders. A new monthly payment could be just a few clicks away for you and your family.

Difficulty:

Moderate

Instructions

Decide Whether to Pursue Refinancing

1. Look at your current mortgage terms. Review your interest rate, monthly payment, whether your interest rate is fixed or variable and consider your financial needs.

2. Research current interest rates. If rates are lower than your current rate, then it is usually a good idea to refinance. If rates are the same or higher, you'll have to consider whether it's in your best interests to go through with refinancing because of other factors like employment or salary.

3. Start getting some quotes from online lenders and from local banks in order to understand your options.

Consider Your Refinancing Options

1. Wade through the materials provided by the various lenders you've asked for quotes from.

2. Decide how much you can afford to pay for a monthly payment. This will help you decide what term of years you want for your mortgage.

3. Contact mortgage lenders to ask questions if you have any. Refinancing can be overwhelming, particularly if you get a number of quotes and lenders are contacting you for your business.

4. Think carefully before you commit to refinancing. Don't be afraid to pass up current offers if the costs of refinancing, like points or closing costs, outweigh any long-term benefit.

5. Negotiate with lenders. Mortgage lenders have lots of competition these days. As a result, ask them how you can limit points or closing costs if you decide you're interested in refinancing.

Complete the Refinancing Process

1. Make sure you're clear on the different options available to you and do not hesitate to ask pointed questions of lenders to make sure you understand their offers.

2. Decide which lender you're going with if you do decide to refinance and contact that lender to provide any additional information or set up an appraisal if necessary.

3. Read any contract provided carefully. Make sure you understand all the terms before you sign a refinancing agreement.

4. Sign the contract. Enjoy your lower monthly payments and celebrate!

Tips & Warnings

• Sometimes the bank you currently have your mortgage with is the best option. You may be able to pay no points or lower costs since the lender knows you and you pay your mortgage on time.

• If interest rates are low, choosing a 15 or 20-year mortgage rather than a 30-year mortgage may be in your best interest. Obviously you must determine if you can afford the monthly payment, but you can save thousands of dollars in interest and free up money for your children's college education or for your retirement by paying off your home earlier.

• If you do decide to refinance, think about any debt you might want to consolidate, such as credit card debt. If you can get a good deal on a mortgage rate, it may warrant rolling other debt into your mortgage to lower your monthly expenses.

Resources

• A site like lowermybills.com can help you get quotes from lenders and decide if refinancing is right for you.
• Lending Tree is another well-known site for getting quotes from various lenders.