A Complete Guide to Refinancing Your Home Loan

guide to refinance

The housing market is constantly changing, leading current homeowners to wonder whether a new mortgage could save them money.

What is refinancing?

Mortgage refinancing is a process that pays your initial loan in full and creates a separate new loan with different terms — and it’s growing in popularity across the country.

Are you one of the thousands of homeowners considering a switch? We have the assistance you need to get started. In this guide, we’ll discuss reasons to refinance your loan, outline the transfer process, and answer some general questions.

Reasons to Refinance Your Loan

Not every homeowner interested in refinancing has the same motive. There are several good reasons to reconsider the terms of your loan, including the need to consolidate debt or obtain a better interest rate.

Here are four of the most common reasons homeowners contemplate refinancing:

1. To Consolidate Debt

For many homeowners, the choice to refinance is more about consolidating debt than changing monthly payments or interest rates. For example, you might roll the expenses associated with home remodeling or college tuition in with your mortgage.

This decision can be risky in terms of fiscal responsibility. While replacing high-interest debt with a low-interest mortgage might seem ideal, it doesn’t automatically guarantee a solid outcome. Once refinancing lowers your total monthly debt payment, you might be tempted to spend outside your means. Then, you’ll end up with high-interest credit card debt.

If you intend to save, invest, or put your additional money toward your mortgage, however, you might benefit from debt consolidation in the form of mortgage refinancing.

2. To Lower Your Monthly Payment

Are you having trouble making your monthly mortgage payment? Whether you have other sizable payments, unexpected expenses, or another reason for seeking relief, a new mortgage with a lower bottom line can make it easier to pay the bills.

It’s important to remember that freeing up hundreds of dollars per month, while helpful, will likely mean an increased loan term with a higher interest rate. Before making this decision, it’s important to examine the pros and cons.

Are the benefits worth the extension?

If you aren’t sure whether refinancing your loan to lower your monthly payment is wise for your household, contact an expert for assistance. There’s nothing wrong with getting a professional opinion.

3. To Shorten Your Loan Term

On the other hand, many homeowners experiencing financial windfalls are interested in raising their monthly payments and shortening their loan term. This is especially common when interest rates fall, giving certain payers an opportunity to significantly shorten their term without paying hundreds of dollars more each month.

4. To Switch Between Adjustable and Fixed Rates

While most adjustable-rate mortgages start out with lower interest rates than fixed-rate mortgages, they often result in periodic increases that result in far higher rates. If you have concerns about your interest rate, refinancing to a fixed-rate mortgage can be a financially sound decision — particularly in a falling-interest-rate market.

The ideal time to switch is usually when your adjustable interest rate is equal-to or above your fixed-rate offer. But you don’t want to take chances in a changing market, either.

A professional can help you determine the right time to refinance.

How Does Refinancing Work?

If you’re still interested in obtaining a new mortgage, you might be interested in how refinancing works. Here, we’ve included a step-by-step guide that outlines the process:

Step 1: Make an Informed Decision

Before meeting with a loan provider, speak to a professional about your options. Make a list of the pros and cons of refinancing.

Are you sure you’re making the right decision?

Do the benefits clearly outweigh the risks and expenses?

Step 2: Gather Information

Potential borrowers, even those who are current homeowners, can face some obstacles when applying for a mortgage. You’ll need bank statements and pay stubs showing exactly how much money you earn, in addition to recent tax returns.

You should also know your credit score before you arrive. The better your score, the better your offer. If you check your score early enough, you’ll have an opportunity to correct any mistakes before facing an inquiry.

Step 3: Shop Around

Don’t agree to sign the first mortgage you’re offered. Take some time to meet with several lenders, choosing the one that best meets your needs and expectations. Remember — you already have your initial mortgage. You don’t need to rush the process.

Keep in mind that your current mortgage lender might not be interested in losing you, particularly if you’ve made regular payments for the duration of your loan. Your lender may be willing to renegotiate the terms of your loan to keep you on-board, streamlining the process and eliminating the need for extensive documentation.

Step 4: Ask Questions

Did you know that, even when you refinance an existing mortgage, you have to pay closing fees?

Ask your lender how much these fees will cost, and make sure you have the money set aside.

Closing fees may include an application fee, a credit check fee, an appraisal fee, an origination fee, a document processing fee, and an underwriting fee.

Step 5: Sign, Sealed, Delivered


You’ve signed a new, refinanced mortgage.

Schedule your payments, make any necessary arrangements, and enjoy your new-and-improved loan.

Contact Embrace Home Loans For Assistance

In this article, we’ve answered the following questions:

● What is refinancing?
● How does refinancing work?
● What does refinancing a loan mean?

If you have additional questions, we’d be happy to answer them for you. Contact the experienced team today at Embrace Home Loans to learn more. We can be reached at (844)-724-9361.

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