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How to Refinance Your Home Mortgage Successfully

by Brandon Cornett (© 2009)

A lot of people have the refinancing bug right now. It happens whenever interest rates drop, which is what we are seeing right now. But there's a right and a wrong way to go about this process. So in this article, we will explain how to refinance your home mortgage successfully.

First, let's talk about what the word "successful" means. Most people refinance for one of the following reasons:

• To lower their monthly payments
• To switch from an adjustable mortgage to a fixed rate
• To consolidate / pay off high-interest credit card debt
• To cash out of their home's equity via cash-out refinancing

So a definition of how to refinance a mortgage successfully would be this: "If refinancing allows you to achieve one or more of the goals listed above, while saving you money in some way, then you can consider it a success."

How to Refinance, the Right Way

Now that we have defined what it means to refinance a home successfully, let's talk about how to get started. The first thing you should do is measure the amount of equity you have in your home (if any). This is an important first step, because you might find out that you're unable to refinance due to a lack of equity. Most lenders will require you to have at least 10% equity, and probably closer to 20%. So start here to figure out if a refi is even feasible.

To figure out how much equity you have, just subtract your current mortgage balance from your home's current value, and you'll know how much equity you have. Once you determine this, you'll know whether or not to pursue refinancing. If you find that you owe more on the home than it's worth in the current market, you are "upside down" in the loan and probably won't be able to get a refi loan.

So what's next? Let's assume you do the necessary research and find out that you've got sufficient equity. So what's next? Here's how to refinance your home loan wisely, by using the using the Internet. You can use the link provided on our quotes page to start the online application process. This is a great way to get the ball rolling, without wasting a lot of time or energy. Once you'll complete the initial application, you'll know if you're a good candidate for refinancing. Then you can move on to the more formal application process (submitting documents, credit checks, etc.).

Once you receive offers from lenders, you need to run the numbers to find out if the refi is going to help you achieve your goals. Use the article below learn how to do this:

Continued >> Refinancing Costs - How to Run the Numbers

I hope this article helps you understand how to refinance your mortgage successfully, and I wish you all the best in your financial endeavors. If you would like to learn more about this process, be sure to check out our refinancing library.