How much time does it take to refinance a house?

How much time does it take to refinance a house?

A proper procedure will enable mortgage lenders to refinance a house quickly and efficiently.

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Opportunities to cut down on our expenses are always awaited. One of the ways we could do this is by refinancing our home. Mortgage rates are constantly declining, making it an opportune time to refinance and save money.

What is Refinancing?

In simple terms, refinancing a house means taking out a new loan to replace your current one. The existing loan is paid off, and the mortgage lenders will offer new loans with different interest terms, tenure, and monthly installment.

Refinancing could be for several reasons,such as:

Lower interest rate: One of the main reasons people refinance their mortgage is to get a lower interest rate and better loan terms. Thus, you can significantly save on your monthly payments.

Change in loan tenure: Longer tenure usually comes with lower EMIs. So people also refinance to change their loan tenure and reduce the monthly payment. On the other hand, if you have excess funds, you can opt for a shorter term. This will help you save on interest payments and help you pay off your mortgage sooner.

Change in loan type: You may want to change from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa. In addition, you can also refinance your VA or FHA loan into a conventional mortgage.

Cash-out refinances: If you need extra cash, refinancing is a good option as it allows you to tap into the equity you have built up in your home. You can use the extra money for home improvements, debt consolidation, or other purposes. Consolidating debts help to improve your credit score and lower your DTI ratio.

Building faster equity: Refinancing can also help you build equity in your home faster. When you refinance into a lower interest rate loan, you free up more money in your budget to put towards your principal balance. This will help you pay off your loan faster and build equity in your home quicker.

Factors to Consider Before Refinancing Your Home Loan:

Refinancing your home loan is a big decision and should not be taken lightly. However, there are many factors that you need to consider before making this choice.

How long do you plan to stay in your home?

If you only plan to stay in your home for a few more years, it may not make sense to refinance as it could take longer to recoup the refinancing costs.

How much equity do you have in your home?

To refinance, you will need to have equity in your home. Equity is the portion of your home's value that you own outright. Most lenders will refinance only about 80 to 90% of your equity. Permanent upgrades can increase the overall value of your house.

What are the current interest rates?

If rates have gone down since you took out your current loan, refinancing could help you save money on interest.

What are the fees associated with refinancing?

Going through a refinance means you need to pay the closing costs again. Be sure to compare the refinancing costs with the savings you hope to achieve.

What is your credit score?

Refinancing affects your credit score. And your credit score will affect the interest rate you qualify for.

What type of loan do you currently have?

You may be able to save money by switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage or from a federal loan to a conventional mortgage.

The Refinancing Process

When you refinance your home, you essentially get a new mortgage. You will need to go through the loan application process again and get approved for a new loan. The entire process of refinancing takes around 30-45 days. It depends on various factors like the type of mortgage; the mortgage refinances company, the market conditions, etc. However, mortgage refinances in Missouri are generally a hassle-free process if all the paperwork is in order.

Here are some of the typical steps involved in refinancing a house:

Research and Choose a Lender:

The first step is to find a reputable mortgage lender near you who offers competitive interest rates. Then, you can compare rates online or ask for recommendations from friends or family.

Apply for the Loan:

Once you have chosen a reputable lender from the various mortgage companies, you will need to fill out a loan application. This will include information about your employment, income, debts, and assets. Missouri mortgage lenders will also need certain documents such as your two most recent

Tax returns

Pay stubs

W-2s or 1099s

Bank statements.

Wait for Loan Approval:

After submitting your loan application, the lender will review your application and supporting documents to determine if you qualify for refinancing. The lender will also pull your credit report to assess your creditworthiness. Once you are eligible for the loan, the lender will send you a loan estimate which includes essential details like the interest rate, monthly payments, etc.

Lock in your Interest Rate:

If you are happy with the terms of the Missouri mortgage loans, you can then lock in your interest rate so that it does not increase before closing on the loan.

Get a Home Appraisal:

Once approved for a loan, the next step is to get a home appraisal. A home appraisal is needed to ensure that the property is worth the amount you are borrowing. Before the appraisal, you may improve your home's value by whitewashing the exterior, mowing the lawn, or landscaping the garden. The appraiser will visit the property and provide a report to the lender. However, the lender may waive the loan appraisal on an FHA, VA, or a USDA loan.

Close on Loan:

Once everything has been approved, you must sign the loan documents and formally close on the loan.

Completing all the above processes can take a few days to a couple of weeks. However, you can speed up the refinancing process by keeping all the documents in order, improving your credit score, and preparing your home for appraisal before applying for a refinance.

The Bottom Line

Refinancing your home can be a great way to save money on your monthly payments. However, it is essential to understand the process and know how long it will take before you can see any savings. By following the steps above, you can make the refinancing process go smoothly and quickly and start saving money as soon as possible.