Refinancing can be a great way to save money and reduce your monthly payment — especially with interest rates as low as they’ve been recently.
But what does that process actually look like?
In most cases, refinancing is similar to your initial mortgage application process. Sometimes, it may be even simpler, and you may not need to complete as many steps.
Let’s go over what you can expect.
Before you can refinance, you’ll need:
- To have had your initial mortgage loan for a certain period. If you refinance before you reach this point, you may owe a prepayment fee.
- To be up to date on your mortgage. That means no recent late payments, forbearance or anything similar. You should be paying your mortgage in full each month.
- Equity in your property. This is the stake that you hold in your property after having paid the mortgage for a while. The exact amount of equity you need will depend on your situation.
- To meet certain financial standards. The requirements for your credit score and debt-to-income ratio can vary by loan program, but don’t expect them to be too different from when you applied for your mortgage.
- Cash on hand for closing costs. You might be able to roll those costs into your new loan balance and pay them off over time, but that would likely result in a higher payment and more interest costs in the long term.
Have any questions? Reach out today to learn more — or to get started on refinancing your loan.