You already know the answer to the question, "How long does a refinance take?" It's the same as the one to "How long's a piece of string?" It's: "It depends." But there are some averages, and also some things you can do to speed up the process, so it's a question well worth exploring.
So How Long Does a Refinance Take?
If you ask a loan officer, the standard response you get might well be 30-45 days. And certainly completing a refinancing in that time is fairly common. But there are plenty of transactions that take much, much longer.
One blogger reported that he completed three refinances between 2005 and 2010, and they each on average took 45 days to complete. But his fourth and most recent one took 97 days. If you trawl online chat rooms, you can find plenty of examples of homeowners who dream of wrapping up the process in fewer than 100 days.
Some of this is down to certain lenders being ridiculously inefficient. And that's not a function of size: Some of America's biggest and most famous financial institutions would find it impossibly challenging to organize a date night (at home, with a delivery pizza and a Netflix movie) let alone process a complicated transaction in a timely manner. It's not unusual to hear horror stories of key staff being unavailable for days on end, the same documents being requested multiple times and even of second appraisals being required because the first one timed out.
If, before you choose yours, you want to find out how efficient and easy-to-work-with your candidate lenders are, you can check out other borrowers' real-life experiences using the LendingTree Lender Ratings & Reviews facility.
How You Can Speed Up the Process
Although some lenders are frustratingly unresponsive and hopelessly disorganized, some borrowers can be equally inefficient. If you want your refinance to go through smoothly and quickly, you don't want to be one of them.
The biggest challenge for many homeowners is pulling together the small mound of documentation necessary to support an application. You should expect to be asked for paperwork to prove your identity, employment, outgoings, income, liabilities and assets. Being able to provide those instantly (and possibly repeatedly) should help to put your case on the fast track. And, even if it doesn't, at least you'll know your lender is 100 percent to blame for delays. To prepare yourself, learn more at Refinance Documents Checklist: What You'll Need to Support Your Application.
If You're in No Hurry
For some homeowners, refinancing is an urgent need. That's especially true for cash-out refinances where money may be required in a hurry. But others – often those who are looking only to shave a little off their mortgage rate and reduce monthly payments – are under less pressure and can afford a more leisurely approach. If you're in the latter group, and have a less than stellar credit score, you might want to delay making your application so you can optimize the rate you're offered.
Your credit score has a huge impact on the rate you're offered. On its website, FICO, the company whose scoring technologies are most widely used by lenders, gives examples of just how big that impact can be. Suppose you want a $216,000 30-year, fixed-rate mortgage refinance, and you have a score in FICO's top range of 760-850. You recently might have been offered a rate as low as 3.4 percent, which would have made your monthly payments $958. But, if your score was way down in the 620-639 band, you're likely to have been offered at that time a rate of 4.99 percent. That may not sound a big difference, but your monthly payments would have risen to $1,158. And, over the 360 months of a 30-year mortgage, that extra $200 a month would add up to $72,000. You can use mortgage calculators to model your own situation.
Get the Best Deal
Chances are, you're in neither the top nor bottom score bands, but any improvement you can make to your existing score might shave a little off the rate you get. You can use the LendingTree credit score service (which is entirely free) to discover and monitor your personal credit score. If you have the time, and your score could stand improvement, you might benefit by waiting a few months to refinance, during which you should:
- Make sure you pay every bill on time
- Avoid opening any new credit accounts (yes, even a store card)
- Pay down balances on your credit and store cards (the lower the better, but certainly below 30 percent of your credit limits)
The risk with taking that advice is that today's ultra-low mortgage rates might rise during those few months you're working on your credit. At the time of writing, rates are stubbornly staying low, and they may well remain that way. But there's no guarantee that will be the case. So you may wish to go ahead and push the button on your refinance now – or at least keep a close eye on current refinance rates, and be ready to make your move if it looks like they're beginning to rise.