Refinancing replaces your existing mortgage with a new loan. Depending on your current mortgage, financial goals, available equity, and market conditions, refinancing may give you an opportunity to change the way your home is financed.
Homeowners consider refinancing for many different reasons, including:
A lower interest rate doesn't automatically mean refinancing is the right choice. Closing costs, the new loan term, how long you expect to own the home, and your overall financial goals should all be considered.
At @Home Mortgage, we'll help you compare your existing mortgage with available refinance options so you can understand the potential costs and benefits before deciding whether refinancing makes sense for you.
How does refinancing a mortgage work?
Refinancing replaces your existing mortgage with a new loan. The new loan pays off your current mortgage, and you begin making payments according to the terms of the new loan.
When does refinancing make sense?
Refinancing may make sense when the new loan helps you accomplish a specific financial goal. That could include changing your interest rate or loan term, lowering a monthly payment, removing mortgage insurance when eligible, changing loan programs, or accessing available home equity. The costs of refinancing should always be considered along with the potential benefit.
Do I need a certain interest rate drop to refinance?
No. There isn't a universal rule that says your interest rate must drop by a certain percentage before refinancing makes sense. Your loan balance, closing costs, new loan term, monthly savings, and how long you expect to keep the mortgage can all affect the decision.
How much does it cost to refinance a mortgage?
Refinance costs vary depending on the loan program, loan amount, property, lender fees, title costs, appraisal requirements, and other factors. Some costs may be paid at closing or, when permitted by the loan program, incorporated into the new financing.
Do I need an appraisal to refinance?
Not always. Some refinance programs may allow an appraisal waiver or use another method of determining the property's value. Whether an appraisal is required depends on the loan program, property, transaction, and underwriting requirements.
How much equity do I need to refinance?
The amount of equity needed depends on the type of refinance and loan program. Some programs allow homeowners to refinance with relatively little equity, while cash-out refinances generally have different loan-to-value requirements.
Can I take cash out when I refinance?
Qualified homeowners may be able to use a cash-out refinance to access a portion of their available home equity. The funds can generally be used for purposes such as home improvements, debt consolidation, or other financial needs, subject to loan program requirements.
Can refinancing remove mortgage insurance?
In some situations, yes. Refinancing may provide an opportunity to eliminate existing mortgage insurance depending on your home's value, available equity, current mortgage, and the new loan program.
Can I refinance an FHA loan?
Yes. FHA borrowers may have several refinance options depending on their circumstances. This can include an FHA Streamline Refinance for eligible borrowers as well as refinancing into another mortgage program when appropriate.
Can I refinance a VA loan?
Eligible VA borrowers may have refinance options including a VA Interest Rate Reduction Refinance Loan (IRRRL) or a VA cash-out refinance, depending on the borrower's goals and eligibility.
Can I refinance if my credit has changed?
Possibly. Credit is one factor considered when qualifying for many refinance programs, but requirements vary. Your income, debts, equity, loan type, property, and overall financial profile may also affect the options available.
Can I refinance an adjustable-rate mortgage into a fixed-rate mortgage?
Depending on qualification and available loan programs, homeowners with an adjustable-rate mortgage may refinance into a fixed-rate mortgage. This can provide a more predictable principal and interest payment over the term of the new fixed-rate loan.
How long does refinancing take?
The refinance timeline varies depending on the loan program, appraisal or valuation requirements, title work, documentation, underwriting, and other factors. We'll help you understand the process and what documentation may be needed for your particular refinance.
What's the difference between a refinance and a loan modification?
A refinance replaces the existing mortgage with a new loan. A loan modification changes certain terms of an existing mortgage and is generally handled through the current mortgage servicer. They are different processes with different qualification requirements.
Lowering Your Monthly Payment
Depending on your current mortgage, interest rate, loan term, and available refinance options, refinancing may provide an opportunity to reduce your monthly mortgage payment.
Changing Your Loan Term
Some homeowners refinance to shorten or extend their repayment term. A shorter term may help pay the mortgage off sooner, while a longer term may reduce the monthly principal and interest payment. Each option has different costs and tradeoffs to consider.
Switching Loan Programs
Refinancing may allow you to move from one type of mortgage to another, such as changing from an adjustable-rate mortgage to a fixed-rate mortgage or moving from an FHA loan to conventional financing when appropriate.
Accessing Home Equity
Qualified homeowners may use a cash-out refinance to access a portion of the equity in their home. These funds may be used for home improvements, debt consolidation, or other financial needs, subject to loan program requirements.
Removing Mortgage Insurance
Depending on your current mortgage, available equity, and the new loan program, refinancing may provide an opportunity to eliminate existing mortgage insurance.
Consolidating Higher-Interest Debt
Some homeowners consider a cash-out refinance to consolidate higher-interest debt. Because this converts other debt into debt secured by your home and may extend the repayment period, it's important to compare the potential costs and benefits before deciding whether it makes sense.
Homeowners with an existing FHA loan may be eligible for an FHA Streamline Refinance, which is designed to simplify the refinance process for qualified borrowers. Depending on the transaction, the program may require less documentation than a traditional refinance and may not require a new appraisal.
Eligible homeowners with an existing VA loan may be able to use a VA Interest Rate Reduction Refinance Loan, commonly called a VA IRRRL or VA Streamline Refinance. The program is designed specifically for refinancing an existing VA loan and can offer a more streamlined process than a traditional refinance.
Homeowners with an eligible existing USDA Rural Development loan may have streamlined refinance options available. Depending on the program and borrower eligibility, USDA refinancing may simplify some of the documentation and appraisal requirements associated with a traditional refinance.
Not sure which refinance option applies to your current mortgage? We can review your existing loan and help you understand which refinance programs may be available to you.
