7 Steps to Refinance a Mortgage Quickly and Properly

Do you want to refinance your mortgage? You might want to consider this option if you want to enjoy better rates and save yourself some cash. Among the benefits of mortgage refinancing are a lower interest rate than the one you’re currently paying, and, in some cases, a no-fee loan refinance. Think of it this way: money saved from mortgage refinancing can ease the pressure on your household budget.

In order to get the best mortgage refinancing rate, you need to approach it with the right mindset. Here are seven steps to refinance a mortgage properly and get the best deal possible:

Step #1: Establish the best mortgage refinancing rates

Establishing the best possible interest rates should be your first step to refinance a mortgage. The interest rate is a massive component when you refinance mortgage. If you took a mortgage at 5%, it doesn’t make sense to seek to refinance at the same rate.

So, first off, determine the interest rate level that would make refinancing sensible. Obviously, this should be lower than what you’re currently paying. Refinance your mortgage if you plan to live in your home past the break-even date.

Step #2: Select a qualified mortgage lender

Once you have establish the interest rate that’s most appropriate for you, the next step is to search for the most qualified lender around. The most competitive interest rate is of no consequence if you can’t secure the loan. Always ensure your lender is qualified. Look for a list of qualified mortgage lenders in your area and then select the best.

Step #3: Shop around for the best mortgage refinancing

Your current lender may not be the most competitive. Neither is the first lender you come into contact with. Don’t make the mistake of choosing a lender without shopping around and comparing the various loan terms. This is critical because different lenders provide different interest rates, offer different contract terms, and charge varying fees.

Get at least three, if not four, quotes to be sure you’re getting the most competitive mortgage refinancing. Besides, if you can demonstrate to a lender that other lenders are offering lower quotes, they might just beat your best quote.

Step #4: Avoid mortgages with high lending fees

For your next step to refinance a mortgage, try to avoid lenders who want to add additional costs and fees into your new refinance loan. Before you sign up for the new mortgage, factor all fees and attendant costs to establish whether it’s worth the effort. A mortgage refinancing plan must make sense, which basically translates into reasonable savings.

For instance, if the total lending costs of refinancing are $3,000 and the refinancing will save you $100 a month, it will take you 30 months to realize “real” savings. The deal could be perfect if you are staying in the home for a long time, but you can see how lending fees could eat into your savings. Shop for a lender with the lowest interest rates and fees.

Step #5: Don’t rush to sign the new mortgage refinancing contract

This next step to refinance mortgage is often overlooked. Most people make the mistake of signing off on a mortgage deal too fast. Don’t be one of them. Take your time to review the fees, costs and contract terms. Just because the rate is better than the one you’re currently paying doesn’t mean you have the best deal on the table.

The lower monthly payments shouldn’t be your only concern. If you’re not careful, you might be slapped with prepayment fees and other exorbitant fees later on. Always read the fine print before signing. The devil is in the detail, after all.

Step #6: Make sure you have good credit

Good things come to those with good or great credit. If your credit has improved, refinancing will likely attract lower interest rates. Perhaps, at the time you took the mortgage, your credit was bad. What this means is that you were likely charged a higher-than-normal interest rate.

Refinancing allows a lender to view you differently. Good credit means you’ve been paying your debts and bills on time. It means you are now a less risky candidate than you were the first time you took the mortgage.

The better your credit, the lower the interest rate you will attract. The converse is also true. Consistent and timely mortgage payments steadily build your credit score, making you a competitive mortgage refinancing candidate.

Step #7: Don’t apply for a new credit card

It’s a huge mistake to apply for a new credit card while at the same time planning to refinance your mortgage. Whether you pay off your new credit bills on time or not, lenders would be unlikely to ignore the fact that you’re getting into more debts. During the refinancing process, pay off your bills upfront and don’t get into a situation that may categorize you as a subprime borrower.

Mortgage refinancing is ideal if you want to lower your monthly mortgage bills and improve your cash flow. However, before you sign, make sure you understand the impact the fees and related refinancing costs will have on your mortgage. In spite of a lower interest rate, you may just conclude you’re better off sticking with the current arrangement.