How to Refinance a Home Mortgage the Right WayReviewAdviceFAQ's

How to Refinance a Home Mortgage the Right Way

Refinancing a home is a major undertaking which should not be taken lightly. After all, refinancing can be life changing.

With great power, comes great responsibility.

That being said, there is a correct way to refinance a home mortgage. There are plenty of wrong ways as well. This guide will point you in the right direction.

Sorting through the Mortgage Lenders

The mortgage industry has its fair share of scammers. It's important to stick with the popular, transparent lenders. Not only do they offer lower rates (economies of scale) but big companies often offer amazing online portals, networking with tons of other lenders, and plenty of reviews for you to get a feel for the reputation of the company. The following are the 5 mortgage lending companies MoneySavingPro recommends:

SoFi states it can refinance your home mortgage in 30 days or less. That's faster than any other claim in the industry. SoFi also lets you pre-qualify before completing an entire application. The loan application is usually the worst part about refinancing. SoFi only makes you do it if it determines your savings will be great. SoFi is a fantastic company for student loan consolidation as well. But be aware. SoFi is expanding but it doesn't yet offer refinancing in all states. Here are states covered:

  • Alabama

  • California

  • Colorado

  • Connecticut

  • Delaware

  • Florida

  • Georgia

  • Illinois

  • Indiana

  • Maryland

  • Minnesota

  • New Hampshire

  • New Jersey

  • North Carolina

  • North Dakota

  • Pennsylvania

  • Rhode Island

  • Texas

  • Vermont

  • Virginia

  • Washington

  • Washington, D.C.

  • Wisconsin

  • Wyoming

ACH (American Heritage Capital) Lending is fairly new to the refinancing scene but it is coming out strong. There are lots of positive reviews and rates are competitive. This company states that if they can't wrap up your refinancing project in 45-days or less, the first month is on them.

Quicken Loans is America's largest online lender. It's the second largest lender in America - period. Quicken Loans has helped more than 2 million Americans with their mortgages. Customer service ratings are through the roof as well.

Loan Depot is another worthy candidate. Loan Depot has a fantastic rating from Credit Karma users. That's saying a lot if you've ever been on Credit Karma. People can be brutal. Loan Depot has an A+ rating by the Better Business Bureau.

Lending Tree is a powerhouse in the refinancing niche. After filling out your refinancing request form, simply wait for lenders to come asking for your business. They will respond via email. Phone and chat support are available as well. Lending Tree feels like a traditional bank that's very good at harnessing the power of the internet. is deifnitely worth a visit.

How to Refinance a Home Mortgage the Right Way

Understanding Refinance Mortgage Rates

There's a rule of thumb for refinancing a mortgage: If you can't save at least .5%, don't do it. However, that is an oversimplification of the process. You may want to refinance a mortgage simple to shorten or lengthen the term. Or you may want to switch from an adjustable rate to a fixed rate mortgage. Understanding refinance mortgage rates comes down to more than trying to shave .5% off or better.

Refinancing involves many costs other than closing costs. There are origination fees, attorney's fees, home inspection costs, documentation fees, etc. These all must be considered when refinancing. When looking at mortgage rates, look at your break-even point. See how long you must pay the new loan until you will start saving money. If you plan to sell your home in a few years (and thus eliminating this mortgage) it likely doesn't make sense to refinance.

The interest rate is a number. It's easy to understand. Getting the complete picture is more complicated.

Working out the Best Deal with Each Mortgage Lender

Refinancing a mortgage is about starting fresh on solid ground. Before signing, consider your options. For instance, should you pay for points? A point is an upfront fee which is 1% of the total mortgage. It's paid to the lender in exchange for a lower interest rate. If you plan on staying in the house for a long time, paying for points makes sense. You pay the fee once but the interest rate remains low forever.

DEFINITELY check to see if you qualify for any special loan programs. There are VA loans, USDA loans, FHA loans, and more. Make sure you've exhausted all these option before going with a generic loan. Leave no rock unturned.

Also, ask about closing costs. See if they are necessary. Closing costs are expensive - typically 3% of the home's purchase price. Make sure there aren't similar fees to battle. That will just lengthen out your breakeven sentence.

Finally, make sure to check local lending institutions. Community banks and credit unions may offer the best refinancing rates. Just be prepared to wait. Small lenders aren't usually as efficient as these massive online lenders.

Why You Won't Refinance the Wrong Way

Given all your newly acquired knowledge, you'll refinance mortgage loans the right way. I'm sure of it.

You can refinance the wrong way by not going through the steps mentioned above. But you won't do that. This article contains enough information for you to refinance successfully.. Right now, it's just a matter of acting. Which lender will you contact first? SoFi? Lending Tree? Your local bank?

Knowledge is power. However, knowledge is useless if it goes unused. Get out there! Or do it from your computer… either way.

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