Mortgage refinancing is one of the top trends of the past year with historic interest rates presenting new opportunities for homeowners. In fact, demand for refinancing jumped 105% in 2020, a trend that’s poised to continue in 2021. 

If you’re considering refinancing your mortgage, knowing the necessary steps may eliminate guesswork and ensure that you get the best rate for your financial situation. Below, we’ve outlined the key things to consider when refinancing and how to make the process as smooth and straightforward as possible. 

Take Stock of Your Finances

Before you start looking for a lender, it’s important to assess your financial situation. The best way to do this is by knowing your FICO score, your debt-to-income ratio, and the status of your existing accounts.

If you haven’t checked your credit history recently, you can obtain a free report from Experian, Equifax, or TransUnion. This can help you address any issues that may affect your credit as well as giving you an overview of your score. 

Once you’ve taken stock of your finances, the questions below can help you determine whether this is the best time to refinance. 

  • Do you plan to remain in your current home for at least five years?
  • Are you looking to reduce your monthly mortgage payment?
  • Has your credit score improved since you first took out your mortgage loan?

If the answer to any of the above questions is yes, chances are refinancing may be the right choice and could help you save money in the long run. 

Assess Your Refinancing Options

With your financial information on hand, it’s time to review your loan options. The three most common options are fixed-rate loans, adjustable-rate loans, and VA loans. Depending on your circumstances, a particular type of loan may be better suited to your situation.

  • Fixed-Rate Mortgage Loan - The most popular refinancing option, a fixed-rate loan ensures consistent payments and can be a good way to pay down principal more quickly. 
  • Adjustable-Rate Mortgage Loan - If you’re interested in lowering your initial payments or you’re planning to move within the next few years, an ARM loan may be a good way to take advantage of low introductory interest rates in the short term. This type of loan has a variable rate structure which adjusts periodically. For a 5/1 ARM loan, this would be at the five-year mark as well as every year thereafter. The second number indicates how often the rate can adjust after the initial change.
  • VA Mortgage Loan - For active military members and veterans, typically a VA loan can offer a better rate than conventional mortgage options.

While choosing the best loan depends on a variety of factors, knowing your options can make it easier to finalize your decision. 

Find the Right Lender

The next step in the process is to find the right lender. One of the easiest ways to do this is to consider those who offer a range of loan options as well as dedicated support. 

Here are a few things to keep in mind when deciding whether a lender is a good fit for you:

  • Long-standing experience - Navigating the ins and outs of refinancing can be complicated, so finding a lender with the right know-how is important. This should include experience funding a variety of different loans for both first-time buyers and those who are refinancing. 
  • Expert guidance - Selecting the right loan option comes down to understanding and weighing your choices. With a mortgage expert in your corner, you’ll be able to streamline the process and pick the best loan.
  • A customer-focused approach - Taking the guesswork out of refinancing starts with personalized service. Opting for a lender who can tailor the process to your specific needs can make a big difference. 

When you’re ready to choose a lender, selecting one who checks all the boxes can have a significant impact on your experience. That’s where loanDepot comes in. With more than 11 years of experience, loanDepot serves thousands of customers a month and makes it easy to see how much you could save by refinancing. 

What's more, loanDepot's mello smartloan™ may be able to make it easier for you to digitally connect income, asset, and employment information, eliminating time-consuming uploads and statement chasing. The mello smartloan™ can then present you with the best loan options for your mortgage needs, enabling you to make an informed decision that could save you time and money.

With interest rates at near record lows, refinancing could be a great way to minimize mortgage costs, shorten the length of your loan, or tap into your home equity. Although refinancing may seem complicated, planning ahead and working with an experienced lender can make the process easier and help you lock in a rate that’s right for you. 

* loanDepot ( / NMLS#174457)