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What Steps Are Required to Refinance a Home Mortgage?

House Miniature and coins
For homeowners with equity in the home, a mortgage refinance is a way to get extra cash for any number of things. Whether you want to add on to your home, make large repairs, pay for college, or purchase a car, your home's equity is a useful tool.

Consider a Mortgage Refinance

A refinance is ideal if you qualify for a lower mortgage rate than the one you currently have. You can decrease your monthly payments substantially, which can have a major impact on your budget.

You could add more money to your savings or pay off some debt. You would also be able to have some more freedom in your budget to have more cash for other projects or expenses.

Once you have decided to refinance your mortgage, the next step is to sit down with a mortgage broker to discuss the types of loans available, any costs associated with a refinance, and what documentation you need for the process. Then you'll have a series of steps to take to follow through with the refinance process.

Fill Out an Application

You need to submit a refinance loan application to get the process started. The process is very similar to a mortgage application. If you use the same lender as before, not as much documentation is needed, as the information will already be on file.

In a few circumstances, an applicant would have to supply additional documents, such as an impaired credit score, a change in income status, or change in liabilities.

Wait for Pre-Approval

Once you submit the application, the next step is to wait for a pre-approval letter. This process could take between a few days to several weeks. If the lender declines the loan, they will provide you with the information they used to make the determination.

Determine the Valuation of Your Property

Upon pre-approval, the property has to go through an evaluation to determine the current value of the home. This is a major step towards the establishment of how much equity is available.

Wait for Approval and Final Documents

The loan documents will be sent to the loan officer for a final review. Those documents will then be sent to you to return for final processing.

Arrange for the Settling of the Previous Loan

Upon loan approval, arrangements to settle the previous mortgage will be made. The lender will send a final payment to the lender of the old mortgage if you are using a new lender for the refinance.

Wait for the Drawdown of the Loan

The final step in the refinance process is the drawdown of the loan. You will receive the paperwork pertaining to the loan as well as the issuance of the remaining equity. The equity is now available for you to use.

Think About the Additional Considerations

If you consider a mortgage refinance, you need to be very cautious before you go forward with the process. Take the time to evaluate the need for the refinance and decide whether or not it is a good option for your circumstances.

A mortgage refinance is a major commitment. Will you be able to continue making the payments for 15 to 30 years? Are there any major life changes that could make this a hardship later in life?

For those who have financial problems and hope to rectify them with home equity funds, it is vital to ensure the issues behind those problems do not continue once the refinance process is complete.

Home equity to pay off debt can be a very helpful tool to many homeowners; however, refinancing can cause detrimental issues if the borrower accumulates additional debt. The key is to remain financially responsible in order to get the most from a home mortgage refinance.

If you need assistance with your mortgage refinance, please contact William C. Hood, Attorney At Law.