So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt.
Regardless of the motivation behind the refinance, understanding the process and timeline can help make everything a little easier. Plus, I’m sure you’re eager to close and get off that hamster wheel sooner rather than later.
This guide will outline the standard timeline that typically unfolds when refinancing your mortgage loan. We’ll also give handy tips to speed up the process and avoid unnecessary setbacks.
How Long Does It Take to Refinance a Mortgage?
You can expect a mortgage refinance loan to take around 30-45 days to complete. It’s important to remember that this timeline is not guaranteed and varies depending on the circumstances at hand.
There are many moving parts and various entities involved that can both speed things up or slow them down. Delays from third parties, like appraisers, inspectors, and credit companies, can occur and are mostly out of your control. Additionally, your lender may be juggling multiple loan applications at once, which can result in longer processing times.
It’s best to focus on the things that you can control, for example – organize your finances, respond to all inquiries in a timely manner, and submit accurate information when applying.
How to Speed up the Mortgage Refinance Process
When interest rates are low, many homeowners decide to refinance. This increase in loan activity can result in a longer than average period to close, upwards to 50 days or more.
Here are specific actions you can take to speed up the mortgage refinance process.
Have a Financial Goal Before Applying
It’s important to know the “why” behind your application. Why did you decide to refinance and what is your long-term financial objective in doing so?
Your loan intentions and financial goals should be clear at the outset. This will affect the type of refinance loan you’ll apply for (rate-and-term, cash-out, or cash-in) and the necessary steps to close.
Here’s an example:
If you’re refinancing to get a lower interest rate and monthly payment, your lender may not require an updated appraisal report. By skipping this step, your loan will not be dependent or held up by an appraiser. You’ll be that much closer to closing.
However, if you decide you actually want to tap into some equity and receive cash midway through the process, this will change your application and loan entirely. Your lender will now require an appraisal be completed, which could set you back several steps.
Tip: know your “why” and try to keep it consistent. This will help to keep everything on track.
Research the Various Loan Options
Research refinance loans in advance. Evaluate the pros and cons of each, and land on one that properly fits your financial goals. A little bit of preparedness can go a long way.
Picking the wrong program can lead to delays of days or maybe even weeks. Your lender could even deny the application entirely, setting you back to square one.
Tip: do your homework and find the loan program that best fits your financial profile and eligibility.
When shopping around for a lender you could ask about processing times, in addition to their current rates and loan estimates. Lenders should be upfront with you regarding their capacity to take on new clients.
If rates are low, loan officers are typically inundated with refinance requests. They may even raise rates to avoid taking on more business.
Tip: contact multiple lenders and gather the information needed to make an informed decision on who to borrow with.
Have a Plan for Closing Costs and Other Fees
Refinancing a mortgage loan comes with many fees from the appraiser, inspector, attorney, lending institution, etc. All of that’s to say you should expect to pay closing costs when first buying the home and when refinancing.
You can choose to pay these fees upfront or finance them with a higher loan amount. Decide how you intend to pay ahead of time. This will allow the lender to evaluate your application with an accurate loan amount. A change in the loan post-approval can cause a significant delay.
Tip: evaluate your finances and make a plan for the closing costs before contacting lenders.
Organize Financial Documents and Check Your Credit Score
Lenders will require the submission of numerous financial documents, including pay stubs, tax forms, bank statements, current mortgage statements, property tax statements, and more. This information will provide an unbiased picture of your creditworthiness.
Figure out how you can obtain each of these documents in advance. Most are typically accessible through your bank’s online portal, your employer’s payroll service, and/or your current mortgage lending company.
Tip: fill out your loan application correctly, with accurate documentation. This can help to accelerate the process. Incorrect or missing information can create a lag in momentum.
Lock in Your Rate
Interest rates are date sensitive. They change daily, no matter the lending institution. Always request an updated estimate before locking in an interest rate.
If you are given an estimate with a low rate, try to lock it in the same day. Not only will you get an excellent interest rate, but you’ll also expedite the process.
Tip: most rates are given an expiration date. Complete the rate-lock paperwork in a timely manner to avoid an extension fee.