by Emily Hechler 
Chances are, you’re not in the same stage of life that you were in when you originally bought your home. Your cost of living may have changed due to factors like a growing family, new vehicle purchases, and other life changes. The good news is that you can refinance your mortgage to better fit your new lifestyle and financial situation.
Refinancing a mortgage can lower your monthly payment by securing a lower interest rate or by making an additional lump sum payment toward your home equity, known as a cash-in mortgage. You might also consider refinancing if you want to lower your monthly payment due to a loss of income. All of these options are possible when you refinance. Follow these steps to refinance your mortgage.
First, get yourself ready. Just like when you first bought your home, there are steps you need to take to prepare yourself to refinance your home. The lender will need proof of income again, so find your paystubs. You will also get a hard credit check. You can use a free credit checking tool like CreditKarma to make sure your credit score is where you would like it to be before getting the official check. A higher credit score could mean a lower interest rate.
Next, get your house ready. When you refinance a mortgage, you essentially take out a new mortgage that pays off your current mortgage. This means that your house will need a new appraisal. Get those home improvements done to increase the value of your home before you refinance. Also, check your home equity balance. If you’ve paid for at least 20% of your home’s value when you refinance, you can get rid of your PMI.
Shop around for the best deal. Talk to different lenders about how low of a rate they can get for you. Be diligent in your search so you know you are getting the most out of refinancing your home. Make sure you inquire with Alltru to find out what rate you can get with us. Keep in mind that refinancing your home means that you will have some additional fees to pay with closing costs, so you’ll be paying some up front too. Expect this total to be 2-5% of the sale price. To see a clear breakdown of your potential savings, try our Time to Refinance calculator.
Next, get under contract. Once you choose your new lender, you can lock in your interest rate. Over the next 30-60 days, you’ll finalize the remaining paperwork required to refinance. You will also complete a refinance appraisal. A refinance appraisal is necessary since the value of your home has likely changed due to fluctuations in the economy and any home improvements you’ve made. The appraisal helps the lender confirm that you won’t borrow more money than your home’s current value. During this time, you’ll also go through underwriting – where your lender verifies your personal, financial, and property information. If all goes smoothly, the final step will be closing day, and you’ll be ready to refinance.
Finally, close on your new mortgage. Just like when you closed on your home the first time, you’ll sign a Closing Disclosure a few days before you close. This document contains the final numbers for your loan. The day that you close, you’ll sign your loan documents and pay for closing costs unless your closing costs are built into your refinanced mortgage.
That’s it! Refinancing can be a smart option to help save you money over the coming years as you pay back your loan. We’re here to support you every step of the way in your refinancing journey.
