Is your mortgage loan a financial burden? Do you have other high interest debts you need to pay off? A mortgage loan refinance might be the right choice to help you meet these goals.
Check out our guide to refinances in Colorado to learn more and find the best lenders to refinance your mortgage loan.
Best Refinance Lenders in Colorado
There are many mortgage lenders that offer refinance options in Colorado. If you’re not sure which lender to work with for your refinance, consider a few of our favorites below.
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Current Colorado Refinance Rates
When you refinance a mortgage loan, you’ll take on a new loan with a new interest rate. If rates have gone down since you got your original loan, you’ll lower your interest rate when you refinance. If rates have gone up, you might actually end up paying more for your mortgage over time.
Just a small change in the interest rate can make a huge difference when it comes to your loan. For example, imagine that you’re refinancing a $150,000 mortgage loan to a 30-year term. You have 2 lenders that can offer a 30-year refinance option. Lender A offers you an annual interest rate of 4% and Lender B offers an annual rate of 3.5%.
If you decide to go with Lender A, you’ll pay a total of $107,804.26 by the time you pay off your loan. If you choose Lender B, you’ll pay $92,484.15. Just half a percentage point difference can save you over $15,000.
Below you can see a chart of current interest rates in Colorado. We update this information regularly to give you access to the most recent data available. Track how rates change over time and compare new rates to your current loan before you decide to refinance.
Most refinance processes follow a similar series of steps — and most homeowners consider refinancing easier than getting a new mortgage loan.
Before you apply to refinance, decide which type of refinance you want. The most common refinance options include:
- Rate or term refinance. When you take a rate or term refinance, you change your mortgage term or interest rate. You can make your term longer or shorter depending on your needs.
- Loan type refinance. You can also refinance to change your loan type. Many homeowners refinance from an FHA loan to a conventional loan after they reach 20% equity.
- Cash-out refinance. Cash-out refinances are a unique type of refinance that allow you to take out a portion of your home’s equity in cash. In exchange, your lender adds the difference to your principal loan balance, which you pay back over time with interest.
Once you decide what you’d like to get out of a refinance, it’s time to choose a lender. The best mortgage company for you will vary depending on the type of loan you need and the application process you prefer. If you aren’t sure which lender you want to work with, speak with a few different representatives to learn what each lender can provide.
After you choose a lender, it’s time to apply for your refinance. Most online lenders now allow you to apply for your refinance entirely from your home computer. Some lenders (like the Quicken Loans® Rocket Mortgage® platform) have taken extra steps to streamline the process and allow you to apply from your phone or tablet. When you apply, your lender will usually ask you for some financial documentation to prove your income. Most lenders will ask for:
- Your last 2 W-2 forms
- Your 2 most recent bank statements
- Your 2 most recent pay stubs
If you’re self-employed, your lender might ask for your full tax return.
You’ll usually get a decision on your refinance shortly after applying. Your lender will send you a document called a Loan Estimate, which contains a preliminary explanation of what you can expect from your new loan’s term, interest rate and any cash you’re qualified to take out of your equity.
After applying, your lender will also begin the process of underwriting your new loan. They’ll verify your financial documentation, run a credit check and ensure the assets in your bank account are seasoned. Your lender will also usually schedule a new home appraisal during this time. As the homeowner, you may now attend your home appraisal to ensure a higher estimated value. Some steps you can take before your appraiser arrives include:
- Tidy up your home so your appraiser can see the true condition of the property
- Create a list of all the permanent upgrades and changes you’ve made to the home
- Finish up any last-minute repairs your home needs
Once underwriting and your appraisal are complete, your lender will send you another document called a Closing Disclosure. Your Closing Disclosure contains the final terms of your loan, including what you owe in closing costs. Review your Closing Disclosure and compare it with the terms laid out in your Loan Estimate to make sure that nothing has drastically changed.
Your lender will schedule a closing meeting within 3 days after you receive your Closing Disclosure. At your closing meeting, you’ll sign onto your new loan. Be sure to bring the following documentation to closing:
- A government-issued photo ID (like a passport or driver’s license)
- A cashier’s check or proof of funds transfer equal to what you owe in closing costs
- Your Closing Disclosure
If your lender owes you money after closing (like in a cash-out refinance), you won’t receive it at your closing meeting. This is because your lender is legally obligated to give you at least 3 days to cancel your refinance after you close. You’ll typically receive your cash between 3 to 5 days of closing.
When Should You Refinance in Colorado?
Refinancing your mortgage loan can give you access to a number of benefits to manage your mortgage more effectively. Some reasons you might want to refinance include:
- A lower monthly payment. If you’re having trouble making your loan payments on schedule, consider refinancing to a longer mortgage term. Increasing the length of your term is more expensive in the long-term, but decreases what you must pay each month.
- Lower interest rates. Interest rates change throughout the year. If current market rates are low, you might want to refinance your loan to take advantage.
- Cash to pay off high interest debt. Credit card debt, student loan debt and other types of debt have much higher interest rates than mortgage loans. If you have high interest debt, consolidating it with a cash-out refinance can save you money.
When Should You Not Refinance?
Refinancing isn’t right for everyone. If any of the following apply to you, you might not want to refinance at this time.
- You aren’t fully settled in your home. The longer you have your loan, the more benefits you’ll see after you refinance. If you plan on moving or selling your home soon, you might end up paying more money in closing costs than you save.
- You think no closing cost refinances are free. Some mortgage lenders offer “no closing cost refinances” that require you to pay $0 at closing. However, even the best mortgage refinance companies don’t offer 100% free refinances.
No closing cost refinances add what you owe in closing costs to the principal balance of your loan. For example, if you’re refinancing $100,000 and you owe $2,000 in closing costs, a no closing cost refinance would increase your loan balance to $102,000. These refinances also usually come with higher interest rates, si they’re more expensive over time. Wait until you can pay your closing costs upfront before you refinance.
- Your loan is new. Most lenders won’t allow you to take 100% of your home equity during a cash-out refinance. If you’ve only been making payments on your loan for a few years, you may not have enough equity to justify taking cash out.
Bad Credit Refinance
If you have bad credit, you might have a more difficult time finding a lender to refinance your mortgage loan. While refinancing with poor credit is harder, it’s not impossible.
An option to refinance with bad credit is an FHA streamline or VA interest rate reduction refinance loan (VA IRRRL). Both the FHA streamline and the VA IRRRL allow you to refinance without a new appraisal or credit check. To qualify for a streamline refinance or a VA IRRRL, you must already have a government-backed loan, have a history of making payments on time and only be refinancing your rate or term.
If you don’t have an FHA loan or a VA loan, consider refinancing with a non-occupying co-client. A non-occupying co-client is someone who doesn’t live in your home but agrees to pay off your loan if you default. Adding a non-occupying co-client makes you a more appealing candidate for a refinance because it offers another route of repayment if you default. But remember that your lender can pursue your co-client for the balance of your loan if you don’t make your payments.
Refinance The Right Way
The key to refinancing your mortgage loan the right way is to do plenty of research before you apply. Lenders offer a variety of loan terms, interest rates and cash-out options in Colorado. Take a few days to fully understand all of your options and find the right loan for you. Don’t be afraid to consult with multiple lenders to find a new loan that meets your needs.
Get Ready for Take Off
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