Refinance Your Mortgage

Know when refinancing pencils out, shop rates properly, gather the paperwork, lock at the right time, and understand what happens at closing.

When It Makes Sense

• Calculate your break-even: closing costs divided by monthly savings = months to break even; refinancing makes sense if you'll stay past that point
• A 0.75–1% rate reduction is a reasonable minimum threshold for a standard refinance — lower reductions may not justify closing costs
• Consider a cash-out refinance only if the proceeds are invested or used to eliminate higher-interest debt — don't trade equity for consumption
• If you're near retirement, a shorter loan term (15-year) may save more total interest than a lower rate on a new 30-year term

Shop Rates

• Get quotes from at least 3 lenders: your current servicer, a credit union, and an online lender such as Better, LoanDepot, or Bankrate's comparison tool
• Apply to all lenders within a 14-day window — multiple mortgage inquiries within this window count as a single hard pull on your credit score
• Compare the APR, not just the interest rate — APR includes points and fees, making different loan structures comparable
• Ask about 'no-closing-cost' refinancing — some lenders roll costs into the rate; this works if you plan to sell or refi again within 5 years

Documents Needed

• Gather: last 2 years of W-2s or tax returns, last 2 pay stubs, last 2 months of bank statements, current mortgage statement, and homeowner's insurance policy
• If self-employed, prepare 2 years of personal and business tax returns plus a year-to-date profit and loss statement

Lock Your Rate

• Lock your rate in writing once you've chosen a lender — verbal rate locks are not binding
• Standard lock periods are 30, 45, or 60 days — choose a lock period that comfortably exceeds your expected closing timeline
• Ask about float-down options — some lenders allow one rate reduction if rates fall after you lock, for a small fee

Close

• Review the Closing Disclosure (CD) within 3 business days of closing — compare every line to the Loan Estimate you received when you applied
• At closing, bring a government-issued photo ID and a cashier's check or wire for closing costs — personal checks are rarely accepted
• Make your old mortgage's next payment on time even if you've submitted closing paperwork — late payments during underwriting can kill the loan