See if refinancing makes sense. Compare your current loan against new terms to estimate monthly and lifetime savings.
Refinancing could save you
Key concepts to understand before refinancing.
The time it takes for the monthly savings from refinancing to equal the closing costs. If you plan to stay in your home longer than the break-even period, refinancing typically makes financial sense.
A new mortgage that is larger than your existing one, allowing you to receive the difference in cash. This taps into your home equity and can be used for home improvements, debt consolidation, or other expenses.
Refinancing specifically to change the interest rate or the loan term without taking cash out. This is the most common type of refinance, aimed at reducing monthly payments or paying off the loan faster.
Fees and expenses associated with refinancing your mortgage, including appraisal fees, title search, origination fees, and attorney fees. These typically range from 2% to 5% of the loan amount.
Upfront fees paid to the lender to reduce your interest rate. One point equals 1% of the loan amount. Paying points can lower your rate but increases upfront costs.
A refinance option where the lender covers the closing costs in exchange for a higher interest rate. This can be beneficial if you don't have cash for upfront costs or plan to refinance again soon.
The ratio of your loan amount to your home's appraised value. Most lenders require an LTV of 80% or less for the best refinance rates. Higher LTV may require PMI.
The total cost of your loan expressed as a yearly rate, including interest and fees. When comparing refinance offers, APR provides a more accurate comparison than interest rate alone.
A simplified refinance process available for FHA, VA, and USDA loans that requires less documentation and often no appraisal. Designed to make refinancing faster and easier for borrowers with these loan types.
A fee some lenders charge if you pay off your existing mortgage early. Always check if your current loan has a prepayment penalty before refinancing, as it could affect your savings.
An agreement that guarantees a specific interest rate for a set period (usually 30-60 days) while your refinance is being processed. This protects you from rate increases during the application process.
The difference between your home's current market value and what you owe on your mortgage. Building equity makes refinancing more attractive and can unlock cash-out options.
