Refinancing the mortgage on your house entails exchanging the mortgage you have for a newer one with a new principal and a different interest rate. The lender will use the new mortgage to pay off the old one. This leaves you with one loan and one monthly payment and ends your relationship with the old mortgage lender.
The stages of refinancing a mortgage are similar to those of buying a house. However, this process is much less complicated and takes less time. Here’s how you can do it.
Review and Apply
After finding a refinancing option that works for you, you need to apply for it. Your lender will ask for details and documentation like income, assets, debt, and credit score. You may also need to provide your spouse’s documents. If you already have a mortgage and you’ve chosen to refinance, your new lender will pay off your current loan.
Rate Lock
After your application is approved, you must lock in your interest rate so it doesn’t change before the loan closes. Depending on factors like location, loan type, and lender, your rate lock can last between 15 and 60 days.
Underwriting
Underwriting is a process undertaken by the mortgage lender in which your financial information is verified, and everything you’ve submitted is deemed accurate and satisfactory. This verification process includes the lender checking when you bought the property and an appraisal process to estimate the property value. This is a crucial step since it impacts the reason you’re refinancing in the first place. If you’re refinancing to take cash out, your property value impacts how much money you’ll get. Conversely, if you are refinancing to lower your monthly payment, your property value determines whether you have enough home equity to do so.
Home Appraisal
The mortgage lender orders the appraisal to receive an estimate of the home’s value.
Closing on The New Loan
When the underwriting and home appraisal process is over, you can close on the new loan. Your final numbers will be sent to you in a document called the Closing Disclosure. On closing day, you may go over the details and sign your documents.
