Before you begin, consider why you want to refinance your home loan. Your goal will guide the mortgage refinance process from the beginning.

Should I refinance into another 30-year loan?

Reducing your monthly payment is usually the goal. And it’s tempting to refinance with another full 30-year term to lower your mortgage payment. But that means you’ll end up taking even longer to pay off your house and paying more interest over the long run.

Instead, you can ask the lender to match your remaining loan term. For example, if you’ve had a 30-year loan for three years, you have 27 years remaining. You can tell the lender to set up the payments, so you repay the refinanced loan over 27 years instead of 30. This way, you reduce the interest you pay over the life of the loan. This is mortgage amortization at work.

Refinancing a mortgage, step by step

Ready to tackle the refinance process? Go!

  1. Set your goal. Reduce monthly payments? Shorten the loan term? Get rid of FHA mortgage insurance?
  2. Shop for the best mortgage refinance rate. Keep an eye on fees, too.
  3. Apply for a mortgage with three to five lenders. Submit all applications within a two-week period to minimize the impact on your credit score.
  4. Lock your interest rate. When you lock the interest rate, it can’t be changed during a specified period. You and the lender will try to close the loan before the rate lock expires.
  5. Close on the loan. This is when you’ll pay those closing costs that were listed in the Loan Estimate and again in the Closing Disclosure. Closing on a refinance is like closing on a purchase loan, with one main difference: No one hands you the keys to the home at the end.

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