Steps to Refinance My Home

When you start to wonder if it’s time to ‘refinance my home’ you may do so with a feeling of dread or a slight hint of panic. Everybody knows that refinances aren’t the simple process that we want them to be. But that’s okay. It may not be simple, but there are steps you can take that may make the process easier. At the very least, these steps will help you make the right decisions regarding the refinance, hopefully leaving you with a refinance that has plenty of financial benefits.

Refinance My Home – Advantages and Disadvantages

Home RefinanceWhen you’re thinking, “Honey, it may be time to refinance my home,” you will want to stop for a second and weigh the pros and cons of that decision. This is your first step. Before you start anything, crunch some numbers and determine whether or not this is a financial move that will leave you better off than you were before.

The advantages of a refinance is that they have the potential to reduce your interest rate, lower your monthly mortgage payment, save you thousands over the life of the loan, and in some cases reduce the pay off time of the loan. All of these can be great reasons to refinance a home. There are disadvantages as well, however, and these often show themselves in the form of longer loan terms, increased bottom line, up front closing costs and fees, and amortization schedules that never seem to go anywhere. Ouch. This is why you absolutely must weigh the pros and cons.

A good way to determine whether or not a refinance will benefit you will be to find a refinance calculator online and plug in the numbers. You can put in the terms of your original loan and compare them to the terms you’re hoping to get with the new loan. After you’ve put in the numbers the calculator will show you your new monthly payment, your break even point (how long it will take for you to pay off the closing costs of the new loan), the monthly savings, the total cost of the loan, and how much you will ultimately save (or lose) after you’ve paid off the entire loan. Trust me, this is going to be your best friend. While you’re at it, compare the amortization schedules so you know what you’re looking at in terms of interest paid for the next five years.

Finding the Right Lender

Once you’ve gotten some idea of what you need in a refinance, you’ll want to figure out whether or not you can qualify. Part of this process will be to go online and compare comps of the homes in your area to get an idea of the value of the home. While you’re at it, take a good hard look at your finances and start making improvements wherever you can. Don’t make any major financial purchase during this time. It will reflect badly on your credit.

When crunching the numbers for your refinance you’re going to get some idea of what you’ll need to be approved for if you want a refinance that is beneficial. Your next step is to start contacting some lending institutions. What you want to do is contact multiple places within a day or two of each other and get refinance quotes from each of them. Have them include as many of the required fees as they can in the quote. You’re trying to get as much info as possible so you can make the best decision for you. Compare the quotes from each of the lenders. If you want to you can even get the calculations from your online source. The key here is to compare everything and go with the lending institution that offers you the greatest financial benefit.

After choosing your lending institution you’ll have to start filling out paperwork and working with the loan officer to get the loan approved. You will more than likely have a loan-lock period, which will lock you in at the terms agreed upon for a specific period of time while all of the paperwork is completed. During this time you’ll need to figure out how you’re paying for closing costs and the fees associated with the new loan. Your loan officer is going to be invaluable during this whole process, so make sure you use one you can trust.

When you think “Oh no, I need to refinance my home!” you don’t need to worry. It’s a process, yes, but if you do your homework and plan ahead, you may very well be able to complete the process with very few bumps in the road. And the hopes is, when all is said and done, that you end up with a loan that helps improve your financial load.