For many homeowners, it may be appealing to refinance your mortgage, whether you’re looking to secure a lower interest rate or pay off your mortgage loan quicker. However, it’s important to understand the specific process before moving forward with refinancing. Our team at Legacy Bank offers some of the most competitive mortgage rates in the area and is detailing what you need to know before you refinance. Keep reading to find out how you can tailor your mortgage to meet the needs of you and your family!

What Is Mortgage Refinancing?

Let’s start with the basics. Mortgage refinancing involves replacing your existing home loan with a new one, typically with different terms. Homeowners often refinance for various reasons, such as securing a lower interest rate, reducing monthly payments, shortening the loan term, or converting an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. While you may want to refinance with your current lender, there is also an opportunity to work with a new one if you choose.

Benefits of Refinancing

Thinking of refinancing your mortgage loan? While refinancing may not be the most suitable option for every household, there are many benefits that attract homeowners. Some of the most notable include:

Lower Interest Rates—If you have the option, you may want to take advantage of lower interest rates! Even a slight reduction can lead to significant savings over the life of your loan. For example, reducing your interest rate from 4.5% to 3.5% on a $300,000 loan can save you thousands of dollars.

Reduced Monthly Payments—You can reduce your monthly mortgage payments by securing a lower interest rate or extending the loan term. This can free up cash for other expenses or investments that may take current priority.

Shorter Loan Term—Many homeowners are focused on saving on interest, even if that means increasing monthly payments. If this applies to you, you may consider refinancing to a shorter loan term to help you pay off your home faster while reducing the accumulated interest!

Converting Your Rate Type—If you have an adjustable-rate mortgage, refinancing to a fixed-rate mortgage can provide stability and predictability in your monthly payments, protecting you from future rate increases.

Cash-Out Refinancing—This option allows you to take out a new mortgage higher than the amount you owe on your existing loan and receive the difference in cash. This difference can then be put toward home improvements, debt consolidation, or other financial needs.

See for Yourself: Use Legacy Bank’s mortgage calculator to determine your monthly payment and amortization schedule!

How To Get Started

Before you apply to refinance your mortgage loan, set a clear financial goal, whether it’s lowering your interest rate, reducing your monthly payment, or tapping into your home equity. Once you have determined your reason for refinancing, you can have a clear goal in mind when beginning the process. Here’s what you can expect, according to our team at Legacy Bank!

1. Assess your financial situation. Review your credit score, income, debts, and home equity to determine your eligibility for refinancing.
2. Shop around for lenders. Compare offers from multiple lenders to find the best terms and rates. Don’t be afraid to negotiate, and consider both traditional banks and online lenders.
3. Gather all necessary documentation. Be prepared to provide detailed financial information, including pay stubs, tax returns, bank statements, and details of your current mortgage.
4. Apply for the loan. Once you choose a lender, complete the application process and ensure you provide accurate information to avoid delays.
5. Lock in your rate. Once approved, you can lock in your interest rate to protect against market fluctuations during the closing process.
6. Close on the loan. Review and sign the closing documents, pay any required fees, and your new mortgage will replace the old one. Make sure to review all terms and conditions carefully before signing.