Refinancing a mortgage is a common homeowner strategy. Doing so might net you a lower interest rate or other benefits, like a new mortgage term or cash from home equity. However, refinancing your mortgage essentially means going through the home loan approval process all over again, and you'll need to be prepared for process before you initiate a refinance.
Since you're refinancing, you've most likely been through the mortgage process before. But here's a refresher on what documents you need and other considerations to be aware of in a handy mortgage refinance checklist.
Take time to ask yourself these questions before refinancing, as it does represent a big financial step.
It would be helpful to use a refinance calculator before beginning the process officially. Determining the right loan amount, your current assets and your debt-to-income ratio are important to taking advantage of the benefits refinancing can offer.
Next is the standard practice of gathering together various personal documents. Each lender will have different requirements for documentation you must produce, but at a minimum you should be prepared to provide your:
Your personal finances have a big role to play in applications for a refinance. Lenders will want extensive documentation for these factors, and will likely request that you submit:
The specifics of your current home loan and residence are of particular importance to the refinancing process. You will need to come prepared with the:
You might need to prepare other documents depending on the value of your refinance, your personal or credit history and existing relationship with the lender. Commonly, these might be:
Closing costs are an unwelcome surprise many run into near the end of the refinancing process. Because a new mortgage is being originated for the refinance, closing costs are a necessary part of the equation. Hopefully you factored these variables into refinancing affordability before, but if not, here's a reminder on expenses tied to refinancing:
Here's a handy guide from the Federal Reserve that you can reference on anything to do with refinancing. It contains an especially helpful passage that breaks down the costs of refinancing. On average, you should expect to pay between 3 and 6% of your outstanding principal in refinancing fees.
Have you ticked off all the needed boxes and are ready to refinance? Reach out to The Federal Savings Bank today to start the process.