During the term of your mortgage, you may want to refinance to meet a variety of personal and financial goals. Refinancing will completely replace your current mortgage with a new loan that provides you with a new term, rate, and monthly payment.
The process of refinancing your loan is very similar to the homebuying process and your lender will require the same documentation and information you provided when you originally purchased your home.
Your primary refinance options include:
- No Cash-out Refinance. You may consider this option to:
- Secure a lower mortgage rate. If current mortgage rates are lower than the rates on your existing mortgage, you could reduce your monthly payments and the total amount of interest that you'll pay over the life of the loan by refinancing at a lower rate. When considering this option, you'll want to take into account how long it would take you to recapture all of the costs of refinancing through savings from the new mortgage payment. Your lender can help you with a cost-benefit analysis.
- Convert from one type of mortgage to another. If your current mortgage is no longer the right fit, refinancing can help you obtain a different loan type. For example, if you currently have an adjustable-rate mortgage and want the security of a set mortgage rate and stable monthly payment, you could refinance into a fixed-rate mortgage.
- Build equity faster. If your financial situation has improved since you bought your home, you may want to secure a mortgage with a shorter term. Your monthly payments likely will be higher, but this will help you own your home sooner and pay less in total interest over the life of the loan.
- Cash-out Refinance. If you've built substantial equity in your home through appreciation and your monthly principal payments, you may be eligible to convert part of your home's equity into cash through a cash-out refinance. You can use this cash to improve your financial situation or the value of your home through improvements.
- Home Affordable Refinance Program (HARP®). You may consider this option if you're current on your mortgage payments but unable to qualify for a no cash-out refinance because you have little or no equity in your home. HARP has helped millions of underwater homeowners take advantage of lower mortgage rates.
Are you better off refinancing? Let our calculator help you do the math.
You can refinance through your existing lender or a new lender. What's most important is that the lender you choose is trustworthy and offers competitive rates and terms. The best way to determine if you're being offered competitive terms is to shop around and compare.
Once you select your lender, you'll work with them in the same way you worked with them in your original purchase. The entire process should take between 30 and 45 days.
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