When it comes to refinancing your home it helps to know the steps you will have to accomplish in order to get your home refinanced. Understanding what you have to do can prepare you to help streamline the process, and make it go more quickly and smoothly.

Steps to Refinancing:

Know what you want to do. You should understand your objectives, and the reasons why you are applying for a refinance. Understand what you are refinancing your home for, whether it is debt consolidation, home improvements, or shortening your loan term.

Fill out your application. Next in the home refinancing steps is filling out your application. This will let you know whether or not you qualify for refinancing your home.

Determine what type of loan you want. You need to decide your preferred loan terms — whether you get an ARM or a fixed rate — and how long you want your terms.

Have your home appraised. Your home has to be appraised as part of the steps to refinancing so that the lender knows how much your home is worth.

Work on getting full approval for your home refinancing. You need to have your home fully approved. A copy of your appraisal will be sent to the lender, and at that time an interest rate will be finalized, and then you’ll end up with your formal loan documents.

Additional documentation. Before everything is completed in drawing up your documents, you may be required to submit further documents regarding your loan funding.

Needed documentation
For most loans here are the documents you will likely need for refinancing loans:
· Copy of your home’s deed
· Information on your current mortgage
· Copy of your homeowner’s insurance policy
· Copies of your pay stubs from the past 30 days
· W-2 form copies from the last two years
· A complete asset list
· List of your credit and loan accounts that are open

A cash-out refinance lets you tap your home equity to get the cash you need. It can be a great way to pay for home improvements, consolidate debt, or make a large purchase.

How cash-out refinancing works
A cash-out refinance replaces your current mortgage with a new loan for a higher balance. Your new mortgage pays off your old one, and you receive the remaining loan amount in cash. That cash comes out of the equity you’ve built in your home.

Because it lets you borrow from your equity, a cash-out refinance is similar to a home equity loan. The major difference is that a home equity loan doesn’t pay off your first mortgage—it gives you just the cash you need, which you repay along with your mortgage.

Benefits of cash-out refinancing
Borrowing against the equity you’ve built in your home is generally cheaper than other types of financing, and it has tax advantages as well.* Credit cards and personal loans usually have much higher rates than home loans, and the interest isn’t tax-deductible.

A cash-out refinance may also reduce your monthly mortgage payments, if the loan term is longer than the remaining term on your existing mortgage. Depending on the new interest rate and loan balance, you may be able to save money each month by spreading out your payments over a longer period of time.

Refinancing with a fixed-rate mortgage
If you plan to stay in your home for the long term and never want to worry about rising interest rates, replacing your ARM with a fixed-rate mortgage may be a smart move. With an interest rate that never changes, a fixed-rate loan gives you predictable payments throughout the loan term.

Refinancing with another ARM
If you plan to move within the next several years, you may want to consider replacing your current ARM with a new one. In most cases an ARM will start off with a lower interest rate than what you’d get on a fixed-rate loan, and that rate can stay fixed for anywhere from three months to 10 years. Depending on how long you intend to stay in your home, you can choose an ARM that isn’t scheduled to adjust until after you plan to move.

Home Equity Loans and Lines of Credit

Your home equity is the difference between what you owe on your mortgage (and on any other home loans) and the market value of your home. You build equity as that difference grows —when you repay mortgage principal to decrease the amount you owe, or when your home’s value increases.

You can borrow against that equity when you need cash, using either a home equity loan or a line of credit. Both offer a number of advantages over other types of financing, including:

Interest savings. Home equity loans and lines typically have much lower interest rates than other types of financing, such as credit cards and personal loans.
Tax benefits. Just like your first mortgage, the interest you pay on a home equity loan or line is usually tax-deductible. Consult your tax advisor about the deductibility of interest.

Comparing Home Equity Loans and Credit Lines

	Home Equity Loan	Home Equity Line of Credit
What you get	A single lump-sum payment for the full loan amount	A revolving source of cash that you can draw from as needed
How you use it	To finance large one-time expenses that have a definite cost	To finance ongoing expenses or miscellaneous purchases, like you would use a credit card
How you pay it back	Repay the full loan amount over a specific time period, at a fixed interest rate	Make payments on the outstanding balance, at a variable interest rate
Benefits	It offers simple repayment terms, and the security of knowing your payments will never increase.	It’s there when you need it, and you only make payments on what you use.

Financing Major Expenses

If you’re making a major purchase, home equity financing may be a more practical way to pay for it than using cash, credit cards, or other types of financing. Consider a home equity loan or line of credit for:

Improving your home. Not only can improving your home make it more appealing for you to live in, but it may make it more valuable as well. The increased value of your home after renovation may be enough to offset the cost of the project.
A second home. If you’re in the market for a vacation or investment home, the equity in your current home can be a good source of down payment and closing funds for your purchase.
Education. A home equity line of credit gives you the flexibility to pay for tuition, room and board, books, and all the other costs of putting your kids through school.
Big events. Life is full of big events with big price tags. Whether you’re looking forward to a wedding, a new baby, or a family trip to Hawaii, home equity financing can make paying for them easier.