Refinancing Your Mortgage

When a homeowner takes out a new mortgage in order to replace their existing mortgage, they are refinancing their home loan. There are different reasons to refinance a home loan, but one of the primary reasons is to save money over the life of the loan by obtaining a more favorable interest rate. There are three different types of refinance loans that consumers can take advantage of, depending on what they’re looking to accomplish: rate-and-term refinance, cash-out refinance, and cash-in refinance.  When you execute a cash-in refinance, you would bring money to the closing table to lower your mortgage balance, thereby saving on interest expense.

The first step to refinancing your mortgage is identifying your goals to determine why you’re looking to refinance your mortgage, as this can help you figure out what type of refinance loan you’ll need. For example, you may be looking to lower your monthly mortgage payments, or you’d like extra cash from your home equity to make repairs or renovate. The next step is applying to get a refinance quote to better understand your options and lock in a rate.

If interest rates are favorable and you’re eligible to lower your monthly mortgage payments with a new home loan, it may be the ideal time to refinance. You may be eligible for a lower interest rate based on the current market, and/or your credit score may have improved since you obtained your initial mortgage. You may be ready to switch from an adjustable-rate mortgage to a fixed-rate mortgage, or you may have a significant amount of home equity that you want to tap into. Refinancing your home at a certain point can also eliminate other added expenses, such as FHA mortgage insurance or private mortgage insurance (PMI), which can lower your monthly payments.  Generally, we recommend refinancing if you can lower your interest rate by more than 0.50% for a similar loan term or remove mortgage insurance from your monthly payment.  We also think it can be a good idea to refinance to lower your mortgage term saving on interest.  Taking cash out of your home can make sense if you have available equity.

A cash-out refinance allows you to tap into your home’s equity. Unlike a second mortgage, with a cash-out refinance, you won’t have a second monthly payment on top of your original mortgage. Great reasons to do a cash-out refinance include paying for home renovations, paying off credit card debt, paying for college or just to create an emergency fund.

This will vary based on several factors including whether you need an appraisal, but usually, the process of refinancing with Filo Mortgage takes about two to three weeks.

Filo Mortgage offers low rates without charging points or lender fees.  There are third-party fees such as title insurance and taxes that can contribute to closing costs. You do have the option to avoid paying for closing costs upfront by rolling them into your new loan.  You can also obtain a lender credit by taking a slightly higher rate to offset some or all of the closing costs.  If you decide to roll the third-party fees into your loan, your mortgage payments can be higher and increase the total cost of the new mortgage. However, this is a popular option with borrowers to avoid paying any costs upfront.

Although a homeowner can technically refinance their mortgage as many times as they’d like, there are some restrictions on how long borrowers have to wait to refinance.  The restrictions are generally tighter if you have an FHA or VA loan.

Some mortgages allow borrowers to refinance immediately if they prefer, whereas others require a waiting period, also known as a seasoning requirement. This waiting period can also be based on the type of mortgage you have and the reason you’re refinancing. For example, if you’re refinancing because you want to eliminate private mortgage insurance, you may have to wait longer before you can refinance. Typically, however, borrowers are required to wait at least six months after closing on a home loan before they can qualify for refinancing.

You may have the option to refinance a second mortgage by doing a cash-out refinance.  You can combine your first and second mortgage into a new loan.

When you refinance, you will need to provide documentation to show your monthly income and financial assets.  You will also need to provide a copy of your driver’s license or green card and documentation of your homeowners insurance policy.  Self-employed borrowers may need to provide additional documentation such as tax returns. If you’re applying with someone else, such as your spouse or a co-borrower, they will also need to provide similar documentation.