There are several reasons to refinance your mortgage once you have built up some equity in the home. For example, you might be able to change the length of your loan for more time to pay, or you might choose a loan that offers lower interest charges.
Once you decide to refinance your home loan, there are several steps you’ll have to follow to start this process.
Check Your Credit Before Exploring Mortgage Refinancing Options
It’s important to check your credit score and your income-to-debt ratio before you start looking for a second mortgage. Your credit score will determine whether you can qualify for a second mortgage, affecting the interest rates you’ll pay. If your goal in refinancing is to pay less interest, take the time to improve your credit score.
Calculate Your Home Equity
Equity is the difference between the value of your home and the amount you still owe to your lender. When you have more equity, you’ll have to borrow less and get better loan terms.
Contact a real estate agent to get an accurate assessment of your home’s value; the market has probably changed since you initially bought your house. If you’re serious about mortgage refinancing, you can hire an appraiser. Your refinancing lender will require an appraisal, so hiring one sooner can help simplify the process.
Start Shopping for a Lender
Take your time to explore lenders in your community and online. Compare the terms each lender is offering, such as interest rates, length of loans, and other factors. Ask what fees the bank will charge and whether you’ll have to pay them upfront. Some lenders will roll those fees into your loan.
Prepare to Refinance Your Mortgage
When you meet with a lender, you should have the documentation they will need to make a thorough assessment. This includes copies of your pay stubs, tax returns, and bank statements. Before the meeting, ask the lender what other documentation you should bring.
Inquire About Closing Costs
When you find a lender, ask them about the closing process for your second mortgage. In particular, ask about any cash you’ll need to cover upfront payments. The closing costs can sometimes get rolled into the loan amount and other fees. Ask your lender if that’s a possibility.
You should create a new folder for your second mortgage to help you keep track of everything relating to it. For instance, you may need proof, or documentation in the future to show that your original loan was repaid or to verify other aspects of your refinancing process. Keeping these documents together will help you find them easily.
Make sure to read any letters you receive from your refinancing lender. Sometimes, the lender will sell your mortgage to another bank, and you’ll need to know when that happens. Since your payments will have to go to the new lender, it’s important to know when that change occurs.
We’ll Help You Refinance
At Accel Mortgage Group, we help you find a second mortgage that will give you more favorable terms. Contact us today to get started!