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What to Expect with the Mortgage Refinance Process

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Historically low mortgage interest rates that we've seen for the past few years have enabled many homeowners to refinance and save hundreds of dollars on their monthly mortgage payments. A mortgage refinance means using a new loan with a lower rate to pay off a higher rate existing loan.

If a refinance of your mortgage seems like the right decision for you, it is important to know the steps of the process.

  • Deciding to refinance — A little research or a conversation with a mortgage specialist may help you decide if a mortgage refinance is right for you. Although refinancing almost certainly will come with fees of a few thousand dollars, this upfront cost should be made up in less than a year if the monthly payments are less than you’re currently paying.

    Just how much of a rate savings determines if refinancing is the right move for you depends on numerous factors, such as loan size, time remaining on existing loan, and current rate. Consult your mortgage broker for a more in-depth analysis.

  • Choosing the loan — Many different types of mortgages are available today to the average homeowner. There is no “one size fits all” when it comes to your homes mortgage. Deciding to go with a 15-year fixed, 30-year fixed, or some form of adjustable loan will depend greatly on your individual circumstances. Do your research and contact a mortgage specialist to find out which loan fits your needs best.

  • Applying for the new mortgage loan — The mortgage application process has become relatively streamlined over the past 10 years or so. You can often apply over the phone in less than an hour. Certain documentation usually is required (pay stubs, bank statements, and so on), so the quicker you find and submit this information to your mortgage professional, the quicker your loan can get approved.

    During the preliminary application process, the mortgage representative may ask for information that will be confirmed with this documentation later.

  • Underwriting your mortgage — During the underwriting process, the mortgage company or bank does its due diligence. They will review the required paperwork from you, have the house appraised to confirm its value, and evaluate your credit. These steps will lead to a decision by the bank or mortgage company as to whether you're eligible for the loan.

  • Closing your mortgage loan — If you are approved for your new mortgage, you can expect to attend a “closing.” A “closing” is the date when the new mortgage actually becomes legal. At the closing, the funds from the new mortgage are distributed either to pay off the old loan or for you to receive. The new mortgage now becomes the mortgage of record and the refinance is officially complete.

    As of this date, your old loan has been satisfied, or paid in full, and you will begin making payments on the new loan. Your refinance is officially complete once the closing is complete.

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