The Process

• When you refinance a loan you must first call around to lenders to get quotes and make sure you're eligible for a new loan. After choosing a lender, you must provide documentation as requested by the bank and get a new appraisal for the home. When approved, the lender sets a closing date for the refinancing during which you'll sign paperwork to take on the new loan.
  
  

What Are Your Needs?

• Analyze your specific needs and reasons for wanting to refinance. Many people refinance in order to get a lower interest rate than the current loan they're holding. Refinancing may also result in a reduction in the monthly payment on the home. Some people decide to refinance as a way to get cash for other needs, like paying off another debt. Refinancing your home is usually convenient if it can help you meet the needs that you've identified while leaving you with a new loan that is either the same or better than the one you have now.
  
  

How Much Is Your Home Worth?

• One of the first things you should do when deciding whether it's a smart idea to refinance is to get an idea of your home's current worth. You can do so by either checking records of recent sales of similar homes in your area or by hiring an appraiser. Find out how much equity you have in the home---equity is the market value less the current loan's balance. If you have a significant amount of equity in the home, that is a main factor in deciding whether it's beneficial for you to refinance at this time.
  
  

Closing Costs

• Another consideration to keep in mind when deciding if refinancing is convenient for you is whether or not you have the cash to pay for the closing costs associated with the loan. Closing costs include lender fees, appraisal costs and title search fees. In some cases the lender will build the costs into your loan, but only if you have enough equity in the home. If you do not have the cash or home equity required to pay your closing costs you may want to hold off on refinancing until you do.