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Whether you’re refinancing your mortgage to get a lower rate, or cashing out some home equity, refinancing can be much simpler than the process you went through when you bought your home. Find out how to refinance your mortgage — and everything you need to know before you do.

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How to refinance your home loan in 8 steps

A mortgage can be the biggest loan you’ll ever have, so knowing how to refinance that debt can help you meet your long-term financial goals. Here’s how to refinance your mortgage in just eight steps:

  1. Set a goal
  2. Improve your credit score
  3. Request real rates
  4. Compare costs and fees
  5. Get a loan estimate
  6. Collect your documents
  7. Limit borrowing, pay your bills, and don’t switch jobs
  8. Choose the best option

1. Set a goal

Your approach to mortgage refinancing will depend on whether you’re most interested in getting a better rate, lowering your monthly payment, or tapping your home equity.

2. Improve your credit score

Get copies of your credit history from all three credit agencies through AnnualCreditReport.com and make sure there are no outstanding issues or mistakes. Anything you can do to boost your credit score can help you get a better rate.

3. Request real rates

Because mortgage loans are so big, even small differences in interest rates can add up to thousands of dollars in savings. Don’t expect to get accurate rates from traditional comparison sites — compare rates directly with Credible where you can request real, prequalified rates from top mortgage lenders in minutes.

4. Compare costs and fees

Mortgage rates don’t tell the whole story either. Make sure you understand what fees you’ll pay with each of your options. Credible provides transparency into lender fees that other comparison sites don’t.

5. Get a loan estimate

Once you’ve compared real rates and fees from multiple lenders, you can get a loan estimate from the lender you’re seriously considering. The loan estimate is a standardized form that makes it easier to compare your options. You’ll have to apply for a mortgage to get a loan estimate, which involves a hard credit check. But keep in mind, rate shopping allows you to apply for the same type of loan multiple times within a certain timeframe will only hit your credit score as a hard inquiry once.

Credible’s loan estimate e-signing process is pain-free. You’re able to receive and view your estimate as well as other disclosures, then DocuSign everything from the comfort of your own home.

6. Collect your documents

The lenders you apply to will want documentation verifying your income and assets. Credible streamlines the application process by automating the collection of required documentation such as pay stubs, bank statements, and tax documents. Licensed loan officers are also available if you need additional support.

7. Limit borrowing, pay your bills, and don’t switch jobs

Running up big-ticket purchases on your credit cards or missing payments on bills could hurt your credit score, which might derail your mortgage application or lead you to pay higher interest rates.

It’s also important to keep your current job and not change jobs (or lose your job) during the mortgage refinance process.

8. Choose the best option

After you’ve applied to multiple lenders and compared loan estimates, choose the option that’s the best fit for your goals.

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When to refinance your mortgage

If you’re most interested in lowering the interest rate on your mortgage, here are a few times that it’s a good time to refinance:

  • Interest rates are falling: Mortgage rates rise and fall when economic conditions change. If you took out your current mortgage when interest rates were higher than they are today, you could save thousands by refinancing.
  • Your credit score improved: To get the best mortgage interest rates, you’ll want excellent credit. If your credit score has increased since taking out your current mortgage, you might be able to refinance at a lower rate.
  • You can afford to switch to a 15-year mortgage: Most people take out a 30-year mortgage when they buy a home, because it makes their monthly payments more affordable. But interest rates on 15-year mortgages can be considerably lower.

If you’re more interested in tapping your home’s equity, the best time to refinance your mortgage is when:

  • Home prices are rising: Rising home prices can give homeowners a bigger equity stake in their homes. Your equity is equal to your home’s current value, minus what you still owe on the mortgage.
  • You’ve paid down your mortgage balance: Even if your home hasn’t increased in value, if you’ve paid down some mortgage principal, you may have some equity that you can tap through a cash-out refinancing.

Benefits of mortgage refinancing

There are six main benefits to mortgage refinancing, and in many cases, you can benefit from more than one:

  • Lower interest rate: The interest rate you can qualify for when refinancing a mortgage will depend on market interest rates, your credit score, and how long you want to take to repay your loan.
  • Lower monthly payment: If you’re able to refinance into a mortgage with a lower interest rate, that will often lower your monthly payment too. But another way to lower your monthly payment is by extending your repayment term.
  • Fixed interest rate: If you’ve got an adjustable-rate mortgage (ARM), your interest rate (and monthly payment) can go up and down as the economy heats up or cools down. When rates are headed up, refinancing from an ARM loan to a fixed-rate mortgage protects you from uncertainty.
  • Tap home equity for home improvements or other big-ticket items: When you’re ready to make home improvements, your home equity can be an affordable source of financing. Or if you have other big-ticket expenses like paying for a child’s college education, you can convert some of your home equity into cash through cash-out mortgage refinancing.
  • Pay off high-interest debt: Because you’re putting your home up as collateral, interest rates on a cash-out mortgage refinance can be hard to beat. Many homeowners tap their home equity to pay off high-interest credit card debt or student loans.
  • Cancel your mortgage insurance: If you have at least 20% equity in your home, but are still paying costly FHA mortgage insurance premiums, now could be a good time to refinance into a conventional (non-FHA) loan.

Risks of refinancing your mortgage

Before refinancing your mortgage, here are some risks to be aware of:

  1. The cost to refinance: Sometimes fees and other costs of refinancing can outweigh the savings. There are many origination charges to consider such as loan-discount points, application fees, and underwriting fees; as well as third-party fees like title insurance, appraisals, and pest inspections.
  2. Home equity is a safety cushion: If you tap your home’s equity, you may have less room to maneuver if you experience financial hardship like unemployment. Home prices are unpredictable, and pulling too much cash out of a home can put homeowners at higher risk of foreclosure in a downturn.
  3. May give up some tax benefits: If you took out a mortgage to buy or improve a home before December 16, 2017, the interest you pay on up to $1 million in debt may be tax deductible. Now, you can only deduct the interest paid on up to $750,000. That means if you refinance an older $1 million mortgage, you’ll be subject to the lower $750,000 cap.

If you have questions about your specific situation, remember to consult with a tax professional or financial advisor.

How to get the best mortgage refinancing rate

Because every mortgage lender has its own methods for evaluating borrowers, getting the best mortgage rate requires that you do a little shopping around — which sometimes can be quite the chore.

Luckily, Credible does a lot of the legwork for you, so you don’t have to feel lost or overwhelmed. You can request prequalified rates from multiple mortgage lenders without affecting your credit score.

Credible makes refinancing easy

  • Compare lenders and save on interest
  • Get cash out to pay off high-interest debt
  • Prequalify in just 3 minutes

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No annoying calls or emails from lenders!