Refinancing a home mortgage can be a great way to get the cash you need. You can also use it to change your mortgage terms or interest rates to improve your finances. If you’re planning on pursuing a refinance, you first need to understand what it involves and how long it takes.

So, how long does a refinance take to close? The answer often makes more sense when you understand what happens at refinance closing. Read on to learn everything you need to know about the process, including what a refinance is, why you might want to consider one, how you can potentially speed up the process, and if you should do it.

What is a Home Refinance?

A mortgage refinance is when you renegotiate the terms of your home loan. Generally speaking, the first mortgage is replaced with an entirely new mortgage. You can do this to get quick cash by mortgaging some or all of your equity, or you can do it to try and get a better interest rate.

Reasons to Consider a Refinance

By and large, there are three reasons to refinance a home. You can search for a better interest rate, change the type of loan (usually the monthly payment that goes with it), or expand the loan to get access to cash.

  • Changing Terms: Changing the terms of the mortgage can mean a few things. It often involves a new, hopefully improved, interest rate. The new terms can make a significant impact on your monthly payments.
  • New Loan Type: you can even change the type of loan, which usually impacts the term. For example, you could switch from a traditional 30-year mortgage to a more aggressive 15-year one. New loan types can offer more flexibility in how you pay the loan. They can save you a lot of money in the long run when leveraged well.
  • Cash Out Refinance: As you make your monthly mortgage payments, some of each payment goes into paying down the original loan amount. The rest of it goes into paying the interest on the loan. money that pays down the loan builds your equity in the property (meaning you owe less than the value of the house). You can use that equity to borrow money and get cash. For example, if you have built up $50,000 of equity in the home, you might be able to borrow up to $50,000 in a cash-out refinance.

How Long Does a Refinance Take?

How long does a refinance closing take? Refinance closing will vary from loan to loan and depends on several factors and circumstances.

In general, refinancing a mortgage can take as long as getting the first mortgage did. The lender will want to review your financials, check the home’s value, assess your property equity, and consider several other factors.

The process usually takes an average of 30 to 45 days, but that’s just a rough estimate. if it’s your first time and the process is a little inefficient, it can take longer. Things like the appraisal and inspections can delay the process.

Most people wonder: how long does it take to sign refinance papers? That’s usually done in a day, once everything is set up and ready to go.

How to Speed up a Refinance

Since closing on a refinance can take multiple months in the worst cases, it helps to know a few tricks to speed up the process. Of course, some delays entirely depend on the bank and how busy they are. But you can expedite the process on your end as much as possible by ensuring you qualify for the loan and have your documents and home in order.

  • Do You Qualify: First, you have to be on the title of the loan for a long enough period (usually at least 6 months), depending on the type of loan. you’ll also need;
    • A good enough credit score
    • Good payment history on your current loan
    • Enough equity
    • A demonstration of your ability to pay the loan and closing costs
  • Documents Prepared: Refinance closing documents typically include the following:
    • W-2 tax forms
    • Pay stubs
    • Bank statements and/or 1099s
    • Homeowners Insurance
    • Title Insurance
    • Statements of Debt
    • Credit Score (the lender can usually pull this if you agree)
    • A list of assets
  • Appraisal Ready: It would help if you also prepared the home, as it will be appraised again. To do this, clean up the house, make the yard and front of the house look nice, and knock out any repairs that are overdue (and that you can reasonably afford).

Should You Refinance

Now that you know what happens after closing on a refinance, you see that it can be a powerful tool to help you improve your financial situation. Still, it isn’t always the right choice. You can determine if refinancing makes sense for you by considering just three things.

  • Current Interest Rates: The most important thing to understand about refinancing is that your interest rates will be based on the current market. if rates are very high, your new loan payment might be higher than your existing mortgage. Every fraction of a percentage matters on a mortgage worth hundreds of thousands of dollars.
  • Equity in Your Home: Equity is the home’s value that’s paid off and clear of the loan. You can use the equity in your home as collateral for a refinance. you’ll need equity to get a loan if you plan to do a cash-out refinance. Typically, you need at least 20% of the home’s value in equity to get a favorable refinance.
  • How Long You Will Stay: In most cases, refinancing extends the terms of your mortgage and adds to the total you will pay. Even when that isn’t the case, refinancing comes with closing costs. So, you only want to refinance a home if you are going to stay there long enough to make it worth your while, which usually comes out to three years or longer.

Refinance Today with HFS FCU

Now you know the answer to “How long to close on a refinance?” If refinancing might be a promising option for you, you should explore your options. You can reach out to HFS FCU today to learn more about home mortgages and refinancing. We’ll discuss your situation and goals. You can (and should!) learn more about refinancing before you commit to anything so you know what you might be getting into and how (or if) it will benefit your finances.

To learn more about home mortgages with HFS FCU, reach out today.

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