How to Refinance Before the Term of the Mortgage
- 1). Ask your lender if the loan has pre-payment penalties. Some mortgages have a penalty for paying off or refinancing before the loan term is finished. This fee is hundreds of dollars, depending on the lender.
- 2). Find out if it's the right time to refinance the mortgage. Check out current mortgage rates with on line comparison tools, such as Yahoo! Real Estate or BankRate. If the market interest rate is at least two percentage points lower than your mortgage rate, it's worth the upfront costs (such as closing costs and pre-payment penalties). For example, if your interest rate is seven percent and the market rate is five percent, it's time to refinance.
- 3). Talk with your existing lender. Share the best interest rate you found with the lender. Ask the company to match the interest rate. Some mortgage companies will waive closing costs to retain existing customers. This can save you thousands of dollars in fees.
- 4). Complete a mortgage application with the new lender. The lender will request supporting documentation, such as pay stubs, tax returns, bank statements and retirement account statements. Provide the requested information so the lender can process and approve the loan.
- 5). Sign loan documents. Review mortgage documents to ensure the information is accurate before signing. Once the documents are signed, loans usually fund within three business days, depending on the lender.
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