A Quick Guide to Refinancing Your Mortgage

by Mack Bartlett

People refinance their mortgages for different reasons. The main reason why you would want to refinance your mortgage may be a low rate of interest. The low rate makes for low monthly payments and that means more available money in your pocket.

Some people decide to refinance their mortgage in order to switch from a variable interest rate to a fixed interest rate. Variable rates, being dynamic, can quickly adjust to a high rate that produces a high monthly payment. This can create problems if your cash flow is tight. A fixed rate of interest is predictable, month-in and month-out; and a much safer way to go.

Regardless of the reasons for refinancing, you must know at least the basic steps of the refinancing process to protect yourself. It’s not difficult but it involves a lot of paperwork and most people have little experience or knowledge in this area. And so here’s a short guide to help.

First of all, you should work with a reputable mortgage broker. Mortgage brokers help you save money in various ways and also they can save you valuable time. The mortgage broker understands the inner workings, offers, and terms of various lenders and knows which lenders have loans that may suit your needs at affordable rates. Try to find a broker through a referral from someone you trust if you can.

Next, you need to start putting all of your financial paperwork in order before meeting the broker. This includes your paycheck stubs, bank records, tax returns (for the past two years), and every creditor record you have. Organize this paperwork so that you can easily answer any questions the broker may have.

Now it’s time to meet with the broker. This is where you can find out what you can afford and what you can’t. After filling out a short application form, the broker will know what types of refinancing deals you might qualify for. Now, it’s up to the broker to find you the best deal according to your requirements.
Once you’re given some actual deals to consider, you should evaluate them side-by-side. Besides comparing the monthly payments and rates of interest, you must also look at the out-of-pocket expenses that you’d have to pay for the loan itself. It’s also advisable to consider mortgage insurance with your refinance. In today’s economic climate it doesn’t hurt to have some extra protection against a financial setback or the loss of a job. Compare the mortgage insurance rate of various insurers and choose the one which is economical and offers the best comprehensive coverage. And don’t forget that through all of this you’re free to bargain over mortgage details and have the broker take back your requests to the lender.

If you plan your refinance in this way, you can save time as well as money. You have to be patient though because the mortgage process can take weeks. But in the end it’s worth it if you get the deal you’re looking for.