How to Refinance a Home Mortgage

October 09, 2019 | by North American Savings Bank


It’s possible that sometime after buying a home, you’ll find yourself considering refinancing it. If this isn’t a route you’ve taken before, you may be surprised at the amount of paperwork involved. To ensure you are well informed about the process, consider these steps when determining if you want to refinance your mortgage:

Reasons to Refinance

There are lots of reasons to refinance your home. Interest rates may have dropped since the time of purchase, so you could save money by refinancing. Perhaps you took out an adjustable-rate mortgage loan initially, and now you want more consistency. And if you’ve unfortunately found yourself in a situation where interest rates keep rising, refinancing could save you from high-interest payments

Refinancing is also a way to access the equity you’ve built up in your house. If you have other debt, particularly loans with a higher interest rate, or if you want to consolidate your debt, refinancing is an attractive option. Renovations and home repairs are also good reasons to tap into your home equity. 

Regardless of your reason for refinancing, find a mortgage refinance calculator to crunch the numbers. This will help you to get a sense of your potential savings.

Shop Around to Find the Best Rate

Different lenders will have varying interest rates, closing costs, and other fees for a refinance. Ask multiple lenders for an estimate so that you can compare and understand the market trends. A lender will provide you with a three-page document that will include the loan terms, a projection of your payments, closing cost estimations, and other applicable fees.

Be Prepared for Refinancing

When considering refinancing, you should review your credit history by getting a free copy of your credit report. Since your credit score affects the interest rates you’ll be offered; it's best to know in advance if it needs improving.

You’ll also want to know your home’s current value. There are tools available online that can help you determine this. You can also look into recent sales in your area.

The paperwork and documentation requested by a lender will be similar to what’s required for a mortgage loan. Financial documents, including pay stubs, tax returns, and verification of other income sources are among the paperwork that you’ll need to gather when refinancing.

Refinance Fees

There are quite a few fees involved with refinancing your home, similar to the closing costs on your initial mortgage. Each lender will break these down for you in their estimate. There also could be charges to pull your credit report and research the title on the home. Be wary of falling into a “no-cost refinance” marketing promotion. This means that these upfront fees are worked into your ongoing loan costs in the form of a more substantial loan balance or higher interest rate.

Making a Decision

At some point, you’ll want to lock in your mortgage refinance rate with the lender you choose. This will ensure that the interest rate you’re offered can’t be changed for a specified period. To prepare for property taxes, insurance, and other expenses you’ll pay at closing, set aside money to cover them. These costs should be listed on your estimate, so you have a clear idea of how much money you need.

If you still have questions on whether refinancing is the right move for you, NASB’s mortgage and refinance experts can help! Reach us by calling 855-455-0753, or click here for more information.