How Does Mortgage Refinancing Work?
You’ve had your mortgage a few years now and have already built up some equity. Lately, you’ve been thinking it might be time to consider refinancing. You’re really hoping you’ll get a better rate, maybe shed that mortgage insurance -- the whole thing sounds pretty awesome overall. But how does mortgage refinancing work?
Two Types of Mortgage Refinancing
There are two main types of mortgage refinancing: traditional and streamline. Streamline refinancing is a very easy choice, but you’ll have to remain in the same loan type with the same lender. Basically, you’re just getting a chance to update your loan terms, which can be beneficial by itself. Often streamline refinances won’t even require a credit check or a full appraisal.
Traditional refinance is what most people think of when they think of refinancing. This is essentially the same process as buying a house, though you get to skip a few steps since you’re not having to negotiate for repairs or trying to haggle for a better sales price. You’ll still need to credit qualify and have a full home appraisal to satisfy the bank.
What Do I Need to Do to Start My Mortgage Refinance?
If there’s a mortgage refinance in your future, there are several routes you can take, but if you follow this guide, you’ll have the most friction-free refinance possible.
Contact your current mortgage provider. Find out if they offer a streamline refinance and if so, what the current terms would be for your home. You may need to meet with a banker for that information, but it never hurts to ask.
Unhappy with your current service? Contact the bank that has your checking account. The banks that you do the most business with are also typically the easiest to work with. If your mortgage provider has been a problem, then choose someone who hasn’t been. For example, if Bank A is your current lender, but you don’t like something about their customer care, you can go to Bank B, where you have your checking account, and apply for a mortgage refinance there.
Get ready for an appraisal. Your home isn’t perfect, none are. But you should still tidy up, de-clutter and fix as much as you can before the appraiser comes. The cleaner and nicer everything looks, the better the appraiser will grade the home’s condition (to a point), improving your appraisal and increasing your home’s loan to value ratio.
Wait for closing. If you’re applying for a streamline refinance, you’re essentially done almost from the moment that you apply at the bank. Traditional mortgage refinances are finished after that appraisal. There’s little left now but wait for your new mortgage to fund, so maybe this is a good time to take up the ukulele or something.
Pull up to the table. Once your documents are prepared, you’ll go to closing all over again. Most of the time you’re not going to be expected to bring anything to closing but yourself and some identification, since your fees will be rolled into the new loan. You can, of course, pay those outside of the loan if you prefer. Just make sure to say something at application time.
Profit! Well, maybe not profit, but your mission is accomplished. You signed, you’ve refinanced! If you got some cash out, you now have a fat check in hand. Your new loan will kick in soon, so make sure you keep an eye on the mailbox for the details.
We can answer any mortgage refinancing specific questions you might have if you just touch base with us here at Home.Loans. The luau isn’t for another half hour, so there’s plenty of time. Maybe we’ll even throw in a free grass skirt (unless Blake hides them all again).