What You Should Know Before You Refinance
Refinancing follows a straightforward process, but knowing what to expect, from application to closing, helps you get a home loan that's more affordable and better suited to your goals.
30–45 days
typical time from application to closing
2–6% of loan value
typical total refinancing cost
3-day
grace period to cancel after closing
How does refinancing a home work?
Like buying a new home, refinancing requires you to apply, get an appraisal of the house, and then close your loan. Technical elements like underwriting and locking in an interest rate are handled by your loan specialist. Typically it takes 30–45 days to complete — confirm the timeline with your lender.
Submit an application
You can stay with your current lender or shop around
The process starts with applying with your lender — who could be your initial lender or a different one. You are at liberty to shop around for a better refinance option, and whoever your home loan lender is will pay off your current loan.
The lender will ask for the same information you supplied when you bought the home: your income, assets, debts (auto loan, credit card, student loans, etc.), recent bank statements, and credit score. If you are married, your lender may request your spouse's documents, and you might need recent tax returns ready if asked for additional documentation.
Underwriting
Your lender verifies everything you submitted
Underwriting begins soon after you submit your application. At this stage, your lender reviews the information and documents you supplied to make sure everything checks out, including an appraisal to determine the value of the house.
If you are refinancing to lower your monthly payment, your home's value could afford you enough equity to get rid of private mortgage insurance — or make you eligible for a different kind of home loan with other long-term financial benefits.
Home appraisal
An estimate of your home's current value
Your lender will order a house appraisal so they can approve you for a refinance loan. In some circumstances an appraisal requirement may be waived depending upon your equity position and loan type. If an appraisal is required the appraiser visits your property, and afterward you'll receive an estimate of your home's value. To ensure it reflects the actual value, tidy up the property, fix any pending upgrades, and list out any upgrades you've implemented since you bought the home.
The appraisal helps determine what loan options are available to you — whether you'll get the loan amount you want, pay the difference out of pocket if your home's value is less than the loan amount, or reduce how much you're requesting.
Locking in your interest rate
Rate locks typically last 15–60 days
Once approved, your lender may give you the option to lock your interest rate in case of fluctuations before the loan closes. Rate locks typically last 15–60 days. Alternatively, you can float your rate — you might get a lower one, but there's a chance you set yourself up for a higher rate instead.
Closing the new loan
Usually faster than closing a home purchase
After underwriting, you can close your loan. The Closing Disclosure, a document your lender provides, shows you all the numbers before you sign. You may have to pay closing costs unless your lender bundles them into your new mortgage loan.
After closing, you have a grace period of 3 days to cancel if something goes wrong and you do not wish to continue.
Wondering if now is the right time to lock a rate?
Rates change constantly. Jimmy's team will tell you honestly — even if the answer is "wait."
Four good reasons
Why refinancing your home loan is a good option
Change your loan term or reduce the monthly payment
If you have a 30-year loan and wish to pay it off faster, refinance to a shorter term like 15 years — this increases your monthly payment but reduces the overall interest you pay. You can also lengthen your loan term to lower your monthly payment.
Take advantage of home equity
With a cash-out refinance, you can borrow more than you owe on your home and keep the difference. If upgrades increased your home's value, you can use that equity toward home repairs, debt consolidation, and other expenses.
Lower your interest rate
Interest rates are constantly changing, so it's wise to refinance to a cheaper rate and save significant money in the long run. Even a slight percentage change, with the help of an experienced lender, will significantly lower your total interest over the loan's life.
Change your loan type
If you started with an adjustable-rate mortgage (ARM) to save on interest, you can refinance to a fixed-rate mortgage when rates are low. You can also refinance an FHA loan to escape mortgage insurance premiums by switching to a different loan type.
Compare your options
What refinancing options do I have?
Start by comparing the two main fixed-rate term options, then look at other refinance structures if your goal is to access equity or reduce upfront costs.
| Feature | 15-Year | 30-Year |
|---|---|---|
| Best fit | A shorter term and lower rates | Low monthly payments |
| Monthly payments | Not your main priority | A top priority |
| Qualification | Not the easier option | Easier to qualify for |
| Time in your home | More than 10 years | Less than 10 years |
| Main tradeoff | Higher monthly payment, but less interest over time | Lower monthly payment by lengthening the loan term |
| Tax advantages | — | Offers the maximum tax advantages |
Cash-Out Refinance
If you have equity in your home, you can refinance for an amount higher than your current mortgage and take the difference in cash — for home improvement, debt consolidation, and other expenses.
Low Upfront Cost Refinance
Refinance without paying as much out of pocket at closing, by accepting a slightly higher interest rate or by folding certain costs into the new loan, which can still make sense if the new terms are better than your current mortgage.
Not sure which fit makes the most sense? An advisor can help you compare term length, monthly payment, and equity goals based on your situation.
Loan Information
Common questions, straight answers.
There's no single right moment. Refinancing tends to make sense when rates have dropped since you got your loan, when your credit or income has improved, or when your goals have changed — like paying the loan off faster or tapping your equity. The honest answer depends on your numbers, so it's worth having someone run them with you before you decide.
Mortgage refinancing follows a straightforward process, but it can get frustrating if you do not have the correct information before you decide to refinance your home. People refinance their mortgage for several reasons, such as lowering monthly payments, shortening the loan term, opting for more favorable terms and conditions, or taking advantage of the equity gained on the property.
What Does Home Loan Refinancing Mean?
When you refinance your home loan (otherwise known as mortgage refinancing), you essentially replace the current mortgage or home loan with a new one. The new lender pays off the former and offers you a new principal and refinance rate. Mortgage refinancing is an excellent way for your new home lender to provide you a personalized home loan that is more affordable.
Before we detail why refinancing your mortgage is a good fit, you should consider some essential aspects of mortgage refinancing.
How Does Refinancing a Home Work?
Like buying a new home, refinancing your home loan also requires you to apply, get an appraisal of the house, and then close your loan. There are also technical elements your loan specialist takes care of, such as underwriting and helping you lock in an interest rate. Typically, it takes between 30-45 days to complete a home loan refinancing process, but you should confirm the timeline with your new lender.
Submit an Application
The process starts with applying with your lender, who could be your initial lender from whom you took out the loan or a different lender. You are at liberty to shop around for a better refinance option, and whoever your home loan lender is will pay off your current loan.
When you apply to refinance, the lender will ask for the same information you supplied when you bought the home. This includes your income, assets, debts (auto loan, credit card, student loans, etc.), recent bank statements, and credit score. In other words, you must meet the requirements to refinance your home loan before you get approved.
If you are married, your lender may likely request your spouse’s documents. You might also need to have your recent tax returns ready if they ask you for additional documentation.
Underwriting
The underwriting process begins soon after you submit your application. At this stage, your lender reviews the information and documents you supplied to make sure that everything checks out. Underwriting includes an appraisal to determine the value of the house.
If you are refinancing to lower your monthly mortgage payment, your home’s value could afford you enough home equity to get rid of private mortgage insurance. You could also be eligible for a different kind of home loan with other long-term financial benefits.
Home Appraisal
When you bought your home, there was an appraisal. Similarly, your lender will order a house appraisal as part of the process leading so they can approve you for a refinance loan. The appraiser will visit your property, and, afterward, you’ll receive an estimate of your home’s value. To ensure the appraisal reflects the actual value of your home, you should tidy up the property and fix up any pending upgrades.
If you have implemented any upgrades in your home since you bought it, it is advisable to list them out. Your home appraisal will help determine what home loan options are available to you, whether you will get the loan amount you want, pay the difference out of pocket (in case the value of your home is less than the loan amount), or reduce how much you’re requesting.
Locking In Your Interest Rate
Assuming you get approved, the mortgage lender may give you an option to lock your interest in case of fluctuations before the refinance loan closes. Rate locks typically last for 15-60 days. Alternatively, you could float your rate, where you have the opportunity of getting a lower rate, but there is a chance you would set yourself up for a higher rate.
Closing the New Loan
After completing the underwriting, you can close your loan, which is usually faster than closing a home purchase. The Closing Disclosure, a document your lender provides, shows you all the numbers before you sign. Keep in mind that you may have to pay closing costs unless your lender bundles them into your new mortgage loan.
After closing, you have a grace period of 3 days to cancel if something goes wrong and you do not wish to continue.
Why Refinancing Your Home Loan is a Good Option?
1. To change your loan term/reduce the monthly payment
If you currently have a 30-year loan and wish to pay it off faster, you can refinance to get a shorter loan like a 15-year term. This change increases your monthly payment and reduces the overall interest you pay. You can also lengthen your loan term if you wish to lower your monthly payment.
2. To take advantage of home equity
With a cash-out refinance, you can borrow more than you owe on your home and keep the difference as gain. If you built upgrades that increased your home’s value, you could use that equity toward home repairs, debt consolidation, and other expenses.
3. To lower your interest rate
Since interest rates are constantly changing, it is wise to refinance with a cheaper rate to save significant money in the long run. Even a slight percentage change due to the help of an experienced lender will significantly lower your total interest over the loan’s life.
4. To change your loan type
If you started with an adjustable-rate mortgage (ARM) to save on interest, you could refinance the ARM loan to a fixed-rate mortgage when the rates are low. You also have the option to refinance your FHA loan to escape mortgage insurance premiums by switching to a different loan type.
What Refinancing Options Do I have?
15-Year Fixed-rate Refinance
Choose this if:
- You want a shorter term and lower rates
- Low monthly payments are not your goal
- You plan to stay in your house for more than 10 years
Roll-down Option
Roll-downs are ideal if you want to refinance with minimal upfront fees. While the rate is slightly higher, a massive downpayment does not have to keep you from obtaining your dream home. As long as the roll-down rate is lower than your current rate, it makes financial sense to refinance.
Cash-Out Option
If you have equity in your home, you can refinance for an amount higher than your current mortgage with the cash-out refinancing option. You can take advantage of the difference and be flexible with how you spend it for avenues such as home improvement and debt consolidation.
30-Year Fixed-Rate Refinance
Choose this if:
- You desire low monthly payments
- You want a loan that is easier to qualify for
- You intend to remain in your house for less than 10 years
- You want the maximum tax advantages
What Does it Cost to Refinance?
Your home loan refinancing cost depends on your specific lender and your current home’s value. In the average mortgage refinancing situation, you will pay between 2-6% of the total value of your loan.
Can I Make Extra Payments to Pay Off the Loan Quicker?
Depending on your specific loan and what your state allows, it could be possible to make extra payments to shorten the life of your loan. Additional payments applied directly to the principal can significantly decrease your loan’s interest and the years you pay on it.
Our Experienced Home Loan Advisors Can Help You Refinance
To obtain the lower monthly payments and interest rates on your home loan, you need a relatable advisor who can walk you through the process. Our team of experienced home loan specialists listens to your unique home loan goals and starts your journey to achieving them. With our home loan refinancing solution, we can also increase your current home’s equity and get you a new loan type.
Our team not only educates you on your best options for an affordable home mortgage but also genuinely cares about your family winning your dream home. You can begin refinancing your home loan by submitting an application on our website or calling our Phoenix office at (480).800.8387.