How to Refinance an Existing Loan

Whether you’re trying to get out from under an adjustable rate mortgage or you simply want to reduce your monthly mortgage payment, a refinance can help. There are several ways to apply for a mortgage refinance, and getting approved for a refinance is easier than obtaining an original mortgage loan. Still, it’s imperative for homeowners to know their options and take steps to get the best interest rates on their new loans.

Difficulty: Moderate

Instructions

1. Pinpoint the reason behind a refinance before applying for a new home loan. A refi can serve a variety of purposes. You can take a cash-out option and use the money to pay off debts. Then again, you can attempt to get a reduced or fixed interest rate and lower your monthly housing expense.

2. Make credit improvements. It’s possible to refinance an existing mortgage loan with bad credit; however, bad credit applicants pay higher interest rates, which can defeat the purpose of refinancing. Take steps to maintain a strong credit history. This includes paying creditors on time and reducing total debts.

3. Save money. Because a mortgage refinance creates a new loan, you should anticipate certain mortgage-related fees. Have upfront cash on hand. This includes funds to pay the application fee, appraisal fee and settlement cost.

4. Find a good mortgage lender. Locating a good and reputable mortgage lender takes time and effort. Rather than pick a random home loan lender, use a mortgage broker and request multiple quotes. This way, you can compare rates, fees and terms before making a final decision.

5. Complete the refinance application. Mortgage loan applications request detailed information on debts and income. Thoroughly complete the application, and include additional information such as banking statements, paycheck stubs and tax returns.

6. Schedule an appraisal. Even after a mortgage lender accepts and approves a homeowner’s refinance application, the deal isn’t finalized until the lender receives the appraisal. Appraisals are relatively short, in which a professional appraiser walks through the property and assesses the home’s worth.

7. Close on the new home loan. Similar to original home loans, refinances involve closing dates, when you meet with your mortgage lender, sign the loan documents and pay the settlement fees, if applicable.