Mortgage Refinance

Mortgage refinance helps you get a lower interest rate, save money and pay off debt faster.
When you refinance a mortgage, you get a new mortgage with a lower interest rate that is used to pay off your old mortgage. You can refinance a mortgage for many reasons, including to save money, change your interest rate, change your monthly payment, shorten or extend your loan term, change lenders or cash out equity.
Compare and find the best lenders and mortgage refinance rates for you.

What is mortgage refinance?

Mortgage refinancing is the process of getting a new mortgage with a lower interest rate to save money. There are many reasons to refinance a mortgage, including getting a lower interest rate, getting a lower monthly payment, taking cash out of your home, choosing a fixed or adjustable rate mortgage, shortening or extending your loan term or even changing mortgage lenders.

How does mortgage refinance work?

A mortgage refinance is the process of replacing your current mortgage with a new mortgage at a lower interest rate.
When you refinance a mortgage, a lender will give you a new mortgage and use the proceeds of the new loan to pay off your old mortgage.

How do you get the lowest mortgage refinance rates?

You can get the lowest mortgage refinance rates by comparing multiple lenders. Make Lemonade can help you compare mortgage lenders and mortgage rates so you can choose the best lender for you. When you refinance a mortgage, you can get a lower mortgage rate, which can save you money and help pay off your mortgage faster. How do you get the lowest mortgage rate? Lenders will evaluate several criteria. If you have a high credit score, stable employment, recurring monthly income, a low debt-to-income ratio and at least 20% equity in your home, you may be well-positioned to get a low mortgage rate.

How do I refinance a mortgage?

To refinance your mortgage, you can take several steps:
  1. Compare lenders, interest rates and loan terms on Make Lemonade
  2. Use a mortgage calculator to learn how much money you can save and to calculate your new monthly payment
  3. Gather any necessary documentation to provide to your mortgage lender
  4. Apply to multiple mortgage lenders to increase your chances of approval, and to find the best lender and interest rate for you.
  5. Get approved.
  6. Sign your new mortgage documents.
  7. Your new mortgage is disbursed.
  8. You’re done!

Is it worth it to refinance a mortgage?

If you can get a lower interest rate on a new mortgage compared to your current interest rate, then it’s typically worth it to refinance a mortgage. With a lower interest rate, you can save money each month on your mortgage and reduce the overall cost of owning your home. This mortgage calculator can help you quickly calculate how much money you can save when you refinance a mortgage.

Why refinance a mortgage?

There are many reasons to refinance a mortgage. Here are a few main reason why you should refinance a mortgage:

Get a lower interest rate

The main reason to refinance a mortgage is to get a lower interest rate. A lower interest means you can save money on your monthly payments and overall cost of your mortgage. As a result, it can be cheaper to own your home and you can have extra cash for living expenses or to pay off debt like student loans or credit card debt.

Get a lower monthly payment

When you refinance your mortgage, you can get a lower monthly payment. For example, a lower interest rate can decrease your monthly payment. Another way to lower your monthly payment is to switch from a shorter-term mortgage to a longer-term mortgage. For example, if you have a 15-year fixed mortgage, you could get a lower monthly payment by switching to a 30-year fixed mortgage when you refinance your mortgage.

Change your loan term

Mortgage refinancing gives you flexibility to change your loan term. A shorter loan-term such a 15-year loan, for example, may have a higher monthly payment, but can save you money overall. In contrast, a 30-year mortgage comes with a lower monthly payment, but may cost more overall due to higher total interest.

Change interest rate type

When you refinance your mortgage, you can choose a fixed interest rate or a variable rate. A fixed interest rate means you have the same interest rate for the duration of your mortgage. No matter what happens to interest rates, your interest rate will stay the same. A variable interest rate, or adjustable rate mortgage, means that your interest rate can increase or decrease over the duration of your loan. If you currently have a fixed rate and prefer an adjustable rate mortgage, or vice versa, then mortgage refinancing can help you.

Cash Out Equity

If you have built equity in your home, and want to cash out some of that equity, you can refinance a mortgage. You can use that cash for living expenses, for home improvements, medical expenses, to pay off debt, to fund your business, investments or any other purpose. If you are using your cash out mortgage refinancing for home improvements, the interest expense may be tax deductible.

Remove Private Mortgage Insurance

If you purchased your home with less than 20% equity, your lender may have required you to take Private Mortgage Insurance, or PMI. If time has passed and you have built equity in your home, refinancing your mortgage could help to remove the requirement for private mortgage insurance. Each lender has its own requirements for private mortgage insurance, so you can check with your new lender when you refinance.

Why should I not refinance my home?

There are several risks to refinancing your mortgage.
Prepayment Penalty: First, you may incur a prepayment penalty. Check with your current mortgage lender if you have a prepayment penalty if you pay off your mortgage early. If you do, you may incur some costs if you refinance. Even with a prepayment penalty, it still could be cheaper over time to refinance a mortgage.
Fees: Second, there may be fees associated with mortgage refinancing. Your lender may charge you fees and you have to hire an attorney or other professionals to help with the refinancing process. Check with your lender about any fees before refinancing. Even with fees, you may still save money overall when you refinance your mortgage.
Time: Every lender is different when it comes to refinancing a mortgage. Typically, it can take 30-45 days to refinance a mortgage. Some lenders may take longer or shorter.

When is the best time to refinance?

The best time to refinance a mortgage is when you can get a lower interest rate. A lower interest rate helps you save money on your mortgage and can lower your monthly payment. If current interest rates are lower than your mortgage interest rate, then it could be a good time for you to refinance your mortgage. The goal of mortgage refinancing is to reduce your interest costs so that you can pay off your principal balance faster. Often, you can realize more savings from mortgage refinance when you own your home for a longer time period. While each lender is different, most lenders require that you have your current mortgage for at least 12 months before your refinance.

What credit score do I need to refinance?

To refinance a mortgage, you typically need at least a 620 credit score. Some lenders may have no minimum requirement for a credit score. A credit score of at least 580 may be required for certain government programs. That said, each lender may have its own requirements to refinance.

Does refinancing my mortgage hurt my credit score?

Like any new loan, lenders will check your credit score when you refinance a mortgage. Therefore, your credit score may be impacted when you apply to refinance a mortgage. If you apply to refinance a mortgage with multiple lenders, the good news is that any credit checks typically count as a single credit inquiry on your credit report. Therefore, it can be beneficial to apply to multiple lenders within a short time period to find the best mortgage refinance rate.
Over time, mortgage refinance may improve your credit score. Why? It’s possible your credit score may improve because you may pay off your mortgage faster once you get a lower interest rate. Plus, you may use the money you save from refinancing a mortgage to pay off student loans or credit card debt. One way to improve your credit score is to pay off high-interest debt.

How much equity do I need to refinance?

Most lenders prefer that you have at least 20% equity in your home. However, each lender will have its own criteria for mortgage refinancing.

What documents do I need for mortgage refinancing?

To refinance a mortgage, you will need several documents, including:
  • Identification such as a driver’s license and Social Security Number
  • Income tax returns
  • Pay stubs
  • W-2’s or 1099’s
  • Mortgage payoff statement
  • Credit report
  • Statement of assets
  • Statement of outstanding debt

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