$50,000 to $10 million loans

Refinancing a mortgage involves replacing your current loan to secure better terms, such as a lower interest rate, shorter term, or access to home equity. Refinancing can reduce monthly payments, save on interest, and provide cash for other needs, making it a beneficial option if you qualify for better terms and plan to stay in your home long enough to offset the costs.

What to know about refinancing your mortgage

Refinancing is the process of replacing your existing loan with a new one, often with more favorable terms like a lower interest rate or a different loan duration. This can lead to lower monthly payments, faster payoff, or access to cash, depending on the type of refinance chosen. It can be a valuable tool for achieving financial goals and improving your overall financial well-being.

Purpose of Refinancing

• Lower interest rates - Homeowners refinance to secure a lower interest rate, which can reduce monthly payments and the total interest paid over the life of the loan.
• Change loan term - Refinancing can allow homeowners to shorten or extend the loan term, for example, switching from a 30-year mortgage to a 15-year mortgage.
• Switch loan type - Homeowners may refinance to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for more predictable payments, or vice versa.
• Access equity - Through a cash-out refinance, homeowners can borrow against their home’s equity to obtain funds for various needs like home improvements or paying off high-interest debt.

Types of Refinancing

• Rate-and-term refinance - The most common type, it involves changing the interest rate and/or the term of the mortgage without taking out additional funds.
• Cash-out refinance - Allows homeowners to borrow more than they owe on their current mortgage, taking the difference in cash.
• Cash-in refinance - Homeowners pay down their mortgage balance during the refinancing process to qualify for lower interest rates or eliminate private mortgage insurance (PMI).

Costs and Considerations

• Closing costs - Refinancing involves closing costs similar to those of the original mortgage, including appraisal fees, title insurance, and loan origination fees.
• Break-even point - Homeowners should calculate how long it will take to recoup the refinancing costs with the savings from the new mortgage terms. This helps determine if refinancing is financially beneficial.
• Credit score impact - Refinancing requires a credit check, and a lower credit score can affect the interest rates offered.

Process of Refinancing

• Application - Similar to applying for an initial mortgage, refinancing starts with a loan application.
• Appraisal - An appraisal may be required to determine the home’s current market value.
• Approval - The lender reviews the homeowner’s financial information, credit score, and the home’s appraisal to approve the loan.
• Closing - Once approved, the homeowner signs the new loan documents, pays closing costs, and the new mortgage replaces the old one.

Benefits and Risks

• Benefits - Potential savings on interest, lower monthly payments, access to home equity, and the ability to switch loan types.
• Risks - Costs associated with refinancing, the possibility of extending the loan term and paying more interest over time, and the impact on credit scores.