How Long Does Refinancing Take? A Guide
Article • 01/13/2022 • 10 minute read
Refinancing to a 15-Year Mortgage: The Pros and Cons
Refinancing is one of the best ways to lower your monthly payments, decrease your interest, and even shorten your loan terms overall. But if you’re looking for a quick fix, is this really the right move?
While we love refinancing, and it’s almost always a recommended avenue for homeowners trying to save money, it’s not an instantaneous process but we do our best to do it in as little as 15 days in many cases. Here’s everything you know about how long it takes, why it takes so much time, as well as how we can help you refinance at lightning speeds.
What Is Refinancing?
When you refinance your home, you’re essentially swapping out your current home loan for a brand new one. Often, this is done so that you can secure a lower interest rate than what you were originally paying.
However, it can also be done to change the terms of your loan, such as by going from a 30 year to a 15 year. Additionally, it can be used to go from an adjustable rate to a fixed rate.
Your lender will use the new mortgage to pay off your old one, so all that’s left is the new loan that you’re now responsible for. You can refinance all sorts of financial obligations outside of homes, such as your car loan or student loans.
Timeline of a Refinance
It should be noted that it’s difficult to give a clear estimate of how long a refinance takes, as the process looks very different for everyone. However, a general rule of thumb is that the entire process takes anywhere from 30 to 45 days from intent to closing but not at Network Capital. We have streamlined the process and as a direct lender, we offer the ability to close quickly and easily.
Let’s take a look at the steps involved in the refinancing process so you can see why it takes so much time. Additionally, it may help you understand how you can speed up the process.
1. Set Your Goals
This step is arguably the most important, and it can take as much time as necessary. You need to have a clear understanding of what you want your refinance to be able to do for your financial situation.
Ask yourself a few questions:
- Am I trying to save money immediately by lowering my monthly payment, or am I more concerned with long-term savings by changing the terms of my loan?
- Do I want to cash out some of the equity from my home?
- Do I want to remove private mortgage insurance or FHA mortgage insurance?
Once you’ve defined your goals, the next step is to decide which type of refinancing best matches them. There are a few different options.
The first is a rate and term refinance. This is what you’ll look for if you’re trying to lower your interest rate or change your loan terms (or maybe even both). This replaces your mortgage with a new one so that you can save money in some way, shape, or form throughout your payment schedule.
The next is a cash-out refinance. This allows you to “tap into” your home equity, which is the amount of money you’ve already paid off on your mortgage.
Essentially, this is a mortgage that is slightly larger than what you still owe on your current loan. It allows you to use excess funds for home improvements, paying off other debt, or any other purpose of your choosing.
Finally, a rate conversion refinance allows you to switch from an adjustable-rate mortgage to a fixed-rate mortgage or vice versa. Typically, people with an ARM loan use this method to switch to a fixed rate after the lower interest period.
2. Shop Around at Multiple Lenders
One of the attractive features of refinancing is that you can shop around at lenders to try to find the best rate. While banks are brick and mortar on every corner, they may have higher rates than a direct lender, like Network Capital.
This is another step of the process that can take as much time as you’d like. Unless you’re in a precarious financial situation with a time constraint, you should take it slow and easy, comparing rates and lenders across the board to ensure that you’re getting the best rates possible.
You also want to keep in mind the closing costs associated with refinancing, which can amount to thousands of dollars. See which lenders might be overcharging for certain closing fees, and make sure you either shy away or bargain with them to try to get the best deal possible.
Here at Network Capital, we understand that budgeting for a refinance is enough of a headache without worrying about closing costs. That’s why we offer $0 lender fees on certain programs. It’s just one of many ways that we help alleviate the headache of home loans so that you can get to the closing table faster and more comfortably.
3. Complete Your Loan Application
Once you’ve chosen a lender and the type of refinancing that works best for you, you’ll need to fill out your application and submit the required documents.
This step can be more time-consuming than you think, but it’s an important step so that the lender can give you the most accurate rates and terms possible. While it varies by lender, you’ll probably need the following documents:
- Paystubs from the last 30 days
- W2s or 1099s from the past year
- Bank statements over the last two months
- Tax returns over the past two years
- Proof of homeowner’s insurance
- Asset statements from the previous 60 days
You may also need to provide additional documents to your lender if you’re self-employed or don’t have a super steady income.
This portion can take some time, but it’s important to close within the terms of your interest rate lock, if you’ve secured one with your lender. We’ll talk more about those in a little bit.
4. Underwriting and Appraisal
The good news is that the process is pretty much out of your hands at this point, and now it’s up to the lender to finish the underwriting process. This is essentially the period in which they review your documents before offering you final approval.
Here, they’ll also order an appraisal for your home to verify its current value. An appraisal is conducted by a qualified appraisal, and they’ll make an unbiased assessment of what they believe your property to be worth based on several factors.
Appraisal and underwriting time frames can vary drastically. We try to make this process easy and hassle free. We provide all the operational support internally to help streamline the process and we do not outsource this process. Many lenders work with multiple different parties in order to get different aspects of the underwriting process completed.
Network Capital does things a bit differently. We do everything in-house through our simplified and streamlined process. Not only does this make the underwriting process a lot easier on our end, but it also allows us to get you to the refinancing closing table in as few as 15 business days. If you’re looking for efficiency, you’ve come to the right place.
You may be able to shorten the underwriting process by responding to any questions your lender has as quickly as possible. Additionally, providing all of the required documents right away can save a ton of time throughout.
Once the underwriting process is completed, there’s a single final step that you’ll need to take before you can enjoy lower interest or more attractive terms. It’s called the Right of Rescission.
The Right of Rescission is a three-day waiting period before your loan funds in which you can decide to cancel your new loan if you change your mind. The rescission period begins after you sign the credit contract, receive your “truth in lending disclosure,” and receive dual copies of a notice explaining your right to rescind.
Provided that you go ahead and close on your refinance, you’ll sign final papers on closing day – just like you did with your initial mortgage.
Remember that you’ll still owe some closing costs even though you're refinancing. Closing costs associated with refinancing include appraisal fees, application fees, title search, title insurance, and underwriting charges.
All in all, be prepared to pay thousands of dollars upfront at closing.
Does the Time It Takes to Close Matter?
While you’re probably itching to get better rates as soon as possible, refinancing isn’t an instantaneous process. But does it really matter if it takes so long?
When you choose your lender and agree to refinance, an agreement forms between both parties, known as an interest rate lock. This essentially guarantees that the interest rate you were offered will remain the same until the time of closing.
This is important, as interest rates are constantly changing. You might lock in an interest rate of 2.5% at the time of offer, but those rates may skyrocket to 3.5% by the time you close. A rate lock protects you from paying anything different than what you agreed upon at the time of the offer.
Here’s the thing – mortgage rate locks only last for a set period of time. Typically, it’s a period of 30 to 60 days. If you close on your home after your rate lock period, you are subject to paying the current interest rates rather than what you agreed on previously.
How to Speed Up the Refinance Process
While a large chunk of the refinancing process is out of your hands and mostly reliant on the lender’s underwriting procedures, there are some simple ways that you can speed up the process and avoid paying a higher interest between offer and closing.
Try to Keep Your Financial Situation Stable
While some situations are out of your control, it’s a good idea to try to stick with a current job and avoid taking on any new debts while going through with a mortgage refinance. The reason for this is that the mortgage lender will need to re-evaluate your circumstances to ensure that you still qualify. And depending on their methods, that can take a lot of time.
Be Open and Honest About Your Finances Up Front
If you’re unsure whether or not you might be able to refinance, you should let your potential lender know this right away. Banks and lenders offer a variety of mortgage products, and they’ll likely provide you information about products that match your given situation, spending time upfront to review your goals.
Failing to mention issues like a lack of funds for closing costs or a history of late payments can make you ineligible to fully qualify for the loan package you were hoping to achieve. Plus, if a loan processor finds blemishes on your record during the underwriting process, they may need to start from square one.
Communication is Key
If your lender tries to reach you to ask you questions about your application but they cannot get to you, the entire process has come to a standstill. Check your emails often, answer your phone when the lender calls, and try to return voicemails in a timely manner so that the lender isn’t spending too much time waiting on you.
Have Your Paperwork Ready Right Away
Applying for a loan doesn’t necessarily mean that your lender can start to take any action towards sending you a final offer. They can’t start until you’ve sent them the necessary paperwork.
By sending them your pay stubs, W2s, and other essential documents ahead of time, they can start looking through your application immediately rather than waiting for you to send over the required materials.
Faster Alternatives to Refinancing
If you need to improve your financial situation quickly, a refinance might not be the best move. One alternative option is a mortgage recast, in which you make a single, large, lump-sum payment to your principal balance. Then, your lender will re-adjust your monthly payment to compensate for the new, low principal balance and the subsequent interest.
If foreclosure is looming and you need a quick fix, ask your lender about forbearance options. Most lenders will allow you to temporarily pause or reduce your mortgage payment if you’re financially struggling. In most cases, you don’t need to pay any additional fees, penalties, or additional interest beyond scheduled amounts.
Of course, forbearance doesn’t mean your payments are eliminated. It just means that you’ll need to make up for those missed payments later on once your situation has improved. Your lender can help you through this process if you need it.
Refinancing is one of the most effective ways to improve your loan’s features, either by lowering the payment period or by decreasing monthly interest. However, it’s not normally a quick fix and can take upwards of 45 days from intent to closing to take effect.
The refinancing process takes several steps, which do you have control over. The most timely part, loan underwriting, can take weeks depending on your lender. And this can be frustrating, as your interest rate lock period is only valid for a set period of time.
However, you can take some steps to speed up the process by supplying all of the necessary paperwork right away, by keeping an open line of communication with your lender, and by trying to keep your financial situation stable between the time of application and closing.
You can also ensure a speedy closing by choosing the right lender. Network Capital does everything from intent to proceed to closing in-house, eliminating the communication delay that other lenders experience. That means we can help you close on your refinance in as little as 15 business days. Apply now and take one step close to living an even better life.
What is private mortgage insurance? | Consumer Financial Protection Bureau
FRB:A Consumer's Guide to Mortgage Lock-Ins | The Federal Reserve Board
How long do I have to rescind? When does the right of rescission start? | Consumer Financial Protection Bureau