Refinancing your mortgage in 6 simple steps.

What is a home refinance?

Refinancing your mortgage means you are replacing your existing home loan with a new home loan. You might want to refinance your loan to get a lower interest rate, to lower your monthly payment and overall expenses, to pay off your loan faster, or to switch from an adjustable-rate to a fixed-rate loan.

How to refinance your home.

When you buy a home, you usually get a mortgage from a lender, who pays for the majority of the cost of the home and then charges you interest over time for that loan. Refinancing is the act of paying off that loan with a new loan, typically with terms that better meet your current needs. Refinancing requires you to complete and submit an application, provide documentation (like tax returns, pay stubs, verification of other assets and debt), go through the underwriting process and then close on the loan.

What are the steps to refinance your home?

1. Consider your financial situation.

Before taking the plunge, consider whether your overall financial situation or credit score have changed dramatically. As long as they are similar to when you purchased — or better — then it’s likely a good time to start exploring different financing options.

2. Reflect on your goals.

What’s your objective in refinancing? Whether you want to reduce your monthly payment, pay the loan off faster or slower, or even access additional equity if your house has increased in value, you’ll want to explore rates for the type of loan that will serve your goals best. Lenders can help you if you have questions.

3. Shop around for rates.

Research and compare offers from various lenders to find the most favorable terms for the type of loan you want — as different financial institutions may have different rates and requirements. Be sure to check with financial institutions with whom you already have a relationship — you may be able to get a lower rate or more favorable terms.

4. Calculate your “break-even” point.

Consider the refinancing fees and closing costs, as well as whether there are significant tax implications before committing to a loan. As closing costs and fees are typically between 3% and 6% of the loan value, it may take a couple of years for you to reach “breakeven,” where your monthly savings reach and exceed the amount it cost to close.

5. Gather the necessary paperwork.

As you probably remember from when you last purchased or refinanced a home, lenders want to know a lot about your financial situation. Make sure that your taxes are in order and that you are ready to provide pay stubs, documentation of other assets and liabilities and other financial records.

6. Close and celebrate.

Closing on a refinance is very similar to closing on a purchase, except that you already have the keys to the home! If you have more than 20% equity in your home, it’s likely that your closing costs will be bundled into the overall loan. If you have less than 20% equity, you may have to bring a check to closing that covers the fees and closing costs. Once you’ve closed, you can enjoy your new rate and celebrate that you’re one step closer to achieving your financial goals.

How many times can you refinance?

There’s no limit to the number of times you can refinance your mortgage, but it’s important to remember closing costs and additional fees like mortgage rate locks. Your existing loan may also include a waiting period, so make sure to do your due diligence before kicking off the process.

Ready to refinance?

When you’re ready, Commerce is ready. If you have questions about your current situation, our mortgage bankers are available to talk with you about your options. You can check rates and apply online today, or call us at 844-340-2574 to learn more about refinancing your home.