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How Does it Work? Refinancing your Mortgage

With all the changes in the financial markets, I've gotten TONS of questions about the process, benefits and risks of refinancing. Sooo many questions in fact that I brought them up at home, and ultimately decided with my husband that it was time for us to take the plunge as well. Here is a little Q&A with some things I've been asked, coupled with our experience.

Q: What does it mean to refinance?

A: At it's very core, refinancing your mortgage allows you to take advantage of a lower interest rate or better terms than you currently have.

Q: How do I know what my current interest rate is?

A: This information should be on your documents from when you closed on your home. Your agent, mortgage lender or mortgage servicer (the company you pay your bill to each month) can also help if you're unsure.

Q: What are current mortgage rates?

A: It changes by the hour some days! While overall we are seeing them at historical lows, they do fluctuate due to the current state of the world, along with the stock market and mortgage trends. Your best bet is to talk to a mortgage lender about your savings goals, and ask them to keep an eye out for a scenario that would allow you to reach them.

Q: What's the process to refinance?

A: It's much easier than purchasing a home! For starters, you will still need to select a lender and apply like you would for a mortgage. Lenders do offer different options, so it doesn't hurt to speak to more than one to see who is the best fit. After your application is processed, you'll get an appraisal on your home to determine its value in the current market. That will determine the rest of the terms of your refinance, and you'll proceed to a closing that's very similar to when you purchased your home.

Q: What costs are associated with the process?

A: Every lender is different, so be sure to get the full picture before applying. You may have to pay an application fee or a small processing fee, as well as attorney fees, the cost of the appraisal and likely some money into your escrow account. Your lender can provide a quote for you, and also give you advice about the potential to roll closing costs into the loan. We ended up doing that, and only paying a small amount on closing day.

Q: How do I know if it's a good deal for me to refinance?

A: A lender and financial planner can provide more specific insight, but a good rule of thumb is if you'd save 1 or more mortgage payments a year, then it's a good idea. Keep in mind your monthly payment differential, and if you can finance closing costs, because those things will make a big impact. Lastly, like a first mortgage, you'll get a month's break before your first payment is due!

If you have any other questions or want to be introduced to some great lenders or closing attorneys, never hesitate to reach out! You can shoot me an email at and I'll give you the scoop.


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