How to Refinance?

This guide provides 8 simple steps to refinance your mortgage. There are many reasons to consider a refinance with the most common being to shorten your term or lower your monthly payment. However, refinancing also allows you to take cash-out from the equity in your home or perhaps remove your mortgage insurance.

Step One: What’s your goal?

Determine what’s important to you in a refinance, as some compromise may be required. To get the lowest rate, for example, you might have higher fees. Lowering your payment might involve lengthening your loan term. Paying off your loan more quickly might result in a higher mortgage payment monthly. There are many options, and a mortgage consultant from Red Oak Mortgage can help guide you to the best possible program.

Step Two: Confirm your eligibility for refinancing

Once you decide that market conditions make refinancing attractive, you should check your credit score and eligibility for refinancing. You can obtain your credit report for free online, or complete the Pre-Qualification tool on our website to verify you are eligible.

Step Three: Research Your Home’s Current Value

One of the biggest factors in refinancing is your home’s current value. Equity is defined as the difference between the current value of the property and how much you owe. The bigger the equity cushion, the better your refinancing options are likely to be. Since real estate values change all the time, you need to make an up-to-date estimate of your home’s value. Check out real estate websites for estimates of your property’s market value and also look at the recent sale prices of comparable properties nearby.

Step Four: Use a Mortgage Refinance Calculator

A mortgage calculator is an excellent tool for comparing your current loan with possible refinance opportunities. The two key things to look at when making this comparison is how refinancing would affect your monthly payment and how it would change the total cost of the loan in the long run. Often, the size of your monthly payment is the most obvious thing people look at when refinancing, and being able to afford those payments is essential. However, spreading a mortgage out over a longer period can lower your monthly payments at the expense of costing you more interest over the long run. A mortgage calculator like the ones in the Resources section of our website can help you decide if a refinance makes sense.

Step Five: Get started with your refinance

Using the Pre-Qualification link on our website, you can get the ball rolling on a refinance. Just click the button and answer simple questions about your home and current situation and we’ll get to work on your application right away.

Step Six: Program Choice

Most refinancing goals can be met with more than one program, and a knowledgeable mortgage consultant can help borrowers determine the most appropriate program for their needs. For example, homeowners desiring smaller payments can achieve them by finding a lower interest rate, stretching out their remaining balance over a longer term or choosing an interest-only loan. We have many loan programs available and look forward to guiding you to the best one.

Step Seven: Understand your fees and costs

Closing costs for a refinance can be a significant amount of money, and might even make the difference in determining whether or not refinancing is cost-effective. Red Oak Mortgage will provide you with a written Loan Estimate of all of the costs associated with your loan and show you how those costs impact your refinance.

Step Eight: Lock and Close

The final step is locking in a mortgage refinance rate and closing the loan. Locking a rate can be done at any time during the refinance process. Until the interest rate is locked, borrowers are said to be “floating” their mortgages. Once a rate is locked, it is guaranteed until the lock expires — unless there are “material” changes to the application, such as the borrower choosing a different program or the home appraising for less than expected. Closing a refinance differs from closing a purchase, and most refinance closings occur within 10 days of application at Red Oak Mortgage. Please feel free to contact us if you have any questions about refinancing not covered in this section.