How Refinancing Works

Refinancing replaces your existing mortgage with a new one, ideally with better terms.

Why Refinance?

1. •Lower your interest rate — Even 0.5% can save thousands
2. •Shorten your loan term — Pay off faster (30-year to 15-year)
3. •Switch loan type — ARM to fixed-rate for stability
4. •Cash-out equity — Access your home equity for major expenses
5. •Remove PMI — If your home has appreciated

The Refinancing Process

1. •Check your finances — Credit score, equity, DTI
2. •Shop for rates — Compare at least 3-4 lenders
3. •Apply — Submit documentation
4. •Appraisal — Lender orders a home appraisal
5. •Underwriting — Lender reviews your application
6. •Closing — Sign new loan documents

Does Refinancing Make Sense?

Calculate your break-even point:

• •If closing costs are $6,000
• •And monthly savings are $200
• •Break-even = 30 months

If you plan to stay in the home longer than the break-even period, refinancing likely makes sense.

Common Refinance Costs

Expect to pay 2-3% of the loan amount in closing costs, similar to your original mortgage. Some lenders offer "no-closing-cost" refinances with slightly higher rates.