Refinancing

When you refinance, you replace your current home loan with a new one. Mortgage refinancing requires you to qualify for the loan, just as you had to meet the lender’s requirements for the original mortgage. You file an application, go through the underwriting process and go to closing, as you did when you initially purchased the home.

The Mortgage Refinancing Process

First, take care of any issues with your credit so that your credit score is as high as possible and you qualify for the lowest interest rates. Have a rough idea of the rates and other terms you desire in your new loan. Remember: These terms should represent an improvement on the terms of your existing loan.

Next, shop around to find a qualified lender with the best terms. Don’t just choose your current lender; get at least three or four quotes from competitors before inquiring with your current lender about what it is willing to offer.

Don’t open any new credit during the refinancing process; it could hinder the deal. Before signing the deal, carefully review the new loan terms and all associated fees so that you know what to expect financially when it’s time to make payments.

As you go through this process, keep an eye on the closing costs. Also, watch out for things like prepayment penalties, which can cause problems down the road if you pay off the mortgage early or refinance again.