3-step Approach to Refinancing Your Home

Especially at a time when interest rates are low, refinancing your home loan can be beneficial to your financial situation by saving you hundreds of dollars on your mortgage payment each month. Refinancing a mortgage is a process though—a process that can be tedious and frustrating at times. Before you sign your refinance mortgage application, take this 3-step approach to refinancing and make sure that it’s the right move for you and that you approach the process in the right way.


Start with your current mortgage lender. The most logical place to start with your refinance investigation is to start with your existing mortgage lender. Since you have an existing relationship with the lender, it may be faster and easier to refinance with them. First, the cost of refinancing (closing costs) may be reduced, depending on how old your loan is. Credit report checks, escrows and appraisals may all be waived if your loan is less than two years old an you have a positive payment record with the lender (always make your payments on time). The existing relationship may also equate to a lower interest rate than borrowing from a lender you don’t currently have a relationship—especially if it means they may lose your business to a competitor.

Compare current lender with other lenders. Shopping for the best deal does not only occur on car dealership lots and the local mall. Refinancing a mortgage is a major financial decision and you need to shop and compare at least three other mortgage lenders to your current lender. It’s almost a guarantee that if you shop four different lenders, you’ll walk away with four different closing costs, interest rates and annual percentage rates.

Once you have your facts and figures together, it’s important to compare the right items to each other before deciding the offer is the right one for you. Many refinance shoppers find the lowest interest rate and decide this is the lender offering them the best deal. This, however, may not be the case. The number you really should be comparing is the annual percentage rate (APR). the APR is the annualized cost of credit, so it give you a true picture of how much the refinance is costing you because it includes the closing costs in the percentage rate.

After comparing the APR, it’s also important to compare the terms and conditions of the new loan. For example, you can’t really compare a 30-year fixed rate mortgage to a 15-year and say that one lender is better than the other. You need to compare lenders based on the same types of mortgages.

Apply for the mortgage refinance. Once you have chosen the lender, the next step is submitting your mortgage application and any supporting documents the lender needs to process you application. Most mortgage companies have stepped into the 21st century so you can speed up the application process by submitting everything online from the comfort of your own home or office. Even if you don’t complete the application yourself, the loan officer you’re talking to on the phone is submitting the information into her computer and everything is done electronically. This also opens up your lender options so that you’re not bound by geography. Expect a mortgage application processing time of anywhere from three to six weeks from the time you submit the application until the time you close on the mortgage refinance

Interest rates are low, so refinancing your home loan may be on your list of things to do before the end of the year. When you chunk the mortgage process down into these three easy steps, it can be a faster, easier and more beneficial way to refinance your home, save you money and make your overall financial situation a little bit brighter.