Congratulations on becoming a homeowner! Owning real estate is one of my favorite ways to build wealth. Over the past two decades, I’ve owned multiple properties and refinanced several mortgages, learning valuable strategies along the way to save significant amounts of money. Here are some insights and strategies that could help you during your mortgage refinance process.
The Mortgage Refinance Process
Back in 2011, I was thrilled when I completed a mortgage refinance on my primary residence. The whole process took about eight weeks, from submitting the initial paperwork—like W2s, bank statements, and pay stubs—to signing the final documents. Although it took a while, the process was straightforward because I stayed with the same bank, which saved me from unnecessary complications and additional fees.
Mortgage Refinance Strategies to Consider
Here are some strategies from my experiences that you might find helpful whether you’re refinancing or applying for your first mortgage:
1. Stick with Your Current Bank
If possible, try refinancing with the same bank that holds your current mortgage. They often offer perks to retain their customers, like rate discounts or waived fees. For instance, during one of my refinances, my bank gave me an additional credit and waived the appraisal fee, which helped me save on upfront costs.
2. Negotiate Rate Adjustments
Even after you lock in your rate, you might get a chance to negotiate a lower one if market rates drop during the application process. For example, after locking in a rate, I managed to get it reduced further when the market rates fell, which significantly lowered my long-term interest expenses.
3. Consider ARM Loans
Adjustable-rate mortgages (ARMs) can be assumable, meaning if you sell your home, the buyer can take over your mortgage at the current rate, which could be a selling point if rates have risen significantly.
4. Don’t Underestimate Title Insurance
Title insurance is crucial as it protects you from any disputes over your property’s ownership. Make sure to keep a copy of your title insurance, as you never know when you might need to defend your property rights.
5. Refinance Before Changing Jobs
It’s wise to refinance while you still have stable employment. Changing jobs or losing your W2 income can complicate your application, making it harder to qualify for a refinance under favorable conditions.
6. Understand All Fees Involved
Be aware of all the fees associated with refinancing. Knowing these costs upfront will help you evaluate whether refinancing is cost-effective and prevent any surprises.
7. Avoid Big Financial Changes During Refinance
Try to maintain financial stability during the refinance process. Major purchases, new debt, or significant changes in your bank accounts can raise red flags with lenders and complicate the refinancing process.
8. Shop Around
Always shop around for the best mortgage rates. Use platforms that allow you to compare real quotes from multiple lenders quickly. This will not only help you secure the best rate but also give you leverage in negotiations.
Investing Insights
If you’re interested in real estate but not ready to manage physical properties or want more liquidity, consider real estate crowdsourcing. Platforms like Fundrise offer diverse real estate investment opportunities across the country, allowing you to invest beyond your local market for potentially higher returns.
Remember, the more you know about the refinancing process and what it entails, the better positioned you’ll be to make decisions that can save you thousands of dollars in the long run.
