Refinance your home: lower your payment, shorten your term or take cash out
A refinance replaces the loan you have with a new one. It only makes sense if the savings beat the cost. Here is how to tell.
Three reasons people refinance
Lower the payment
A rate-and-term refinance swaps your rate or term to cut your monthly payment.
Pay it off faster
Move to a shorter term. The payment can go up, but you pay much less interest.
Take cash out
A cash-out refinance turns some of your equity into cash for repairs or debt. You borrow more, so be sure it is worth it.
Another common reason: moving from an FHA loan to a conventional loan to drop mortgage insurance, if you qualify.
Does it make sense? Do the break-even math
Divide your closing costs by what you save each month. The answer is how many months until the refinance pays for itself.
Example numbers only. Your costs and savings come from your Loan Estimate.
How refinancing works
- Set your goal: lower payment, shorter term or cash out.
- Compare Loan Estimates from more than one lender.
- Apply and lock your rate. Send pay stubs, bank statements and your current loan details.
- Appraisal and underwriting. The lender checks your home's value and your file.
- Close. On a refinance of your main home, federal law usually gives you three business days after closing to cancel.
Refinance questions
How much does it cost to refinance?
Closing costs on a refinance often run a few percent of the loan amount. Your Loan Estimate lists every cost. Some lenders let you roll costs into the loan or trade a higher rate for lower costs.
When does refinancing make sense?
When your monthly savings pay back your closing costs before you plan to sell or refinance again. Divide the costs by the monthly savings to find your break-even point.
What is a cash-out refinance?
A new, larger loan that pays off your current one and gives you the difference in cash. You borrow more, so your balance and often your payment go up.
Will refinancing hurt my credit?
The lender's credit check can lower your score a little for a short time. Several mortgage checks within a short shopping window usually count as one.
NEXA Mortgage, LLC (NMLS #1660690) is the lender; AXEN Realty does not make loans. AXEN Realty and NEXA Mortgage are affiliated companies. You are never required to use NEXA Mortgage or any AXEN-affiliated lender. Compare lenders, and ask your agent for the written Affiliated Business Arrangement Disclosure before you choose. Rates, programs and approval depend on your credit, income, property and lender guidelines. Equal Housing Lender.
AFFORDABILITY CALCULATOR
Quite affordable.
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