Refinancing Your Home
Mortgage refinancing can help you save money, increase your cash flow, or pay off debt. Whatever your reasons for needing a refinancing loan, Standard Lenders is ready to help. Let us help you find the best refinancing solution for your financial needs.Get Started
What is Mortgage Refinancing?
Mortgage refinancing basically means taking out a new home loan to pay off your existing one. This new mortgage will have a different principal, interest rate, and terms. The loan can also be from a different lender than the one you originally borrowed from. When done carefully, refinancing your home can have many financial advantages.
You can refinance to get a lower interest rate, shorten the term of your mortgage, or tap into home equity to raise more cash. Since traditional refinancing can cost you between 3% to 6% of a loan’s principal, it’s important to make sure that the new mortgage is a wise financial decision. If you regret your decision, you can cancel the refinancing loan within three days of closing.
Types of Mortgage Refinancing
There are generally two reasons for refinancing your home. You either refinance to change your mortgage’s rates and terms, or liquidate home equity to improve your finances. As a result, lenders have developed diverse types of mortgage refinancing products to meet different needs. Here are the four most common types of mortgage refinancing:
1. Rate-and-term refinance
Rate-and-term refinancing allows you to change either the loan’s interest rate, the length of the mortgage, or both. This refinancing option can help you save money by lowering your monthly payments or reducing the total cost of the loan. You take out a conventional loan or apply for government-insured programs to replace your current mortgage.
2. Cash-out refinance
Cash-out refinance is a reverse mortgage loan that allows you to liquidate some of the equity in your home. The funds you get from refinancing your home can be used to supplement retirement income and provide money for goals or emergencies. Standard Lenders offers a Flexible Payment Program that enables you to pay when and how much without any penalties.
3. Debt-consolidation refinance
Another popular type of traditional refinancing, debt consolidation loans allow you to take out cash from your home equity to pay off non-mortgage debt. Personal loan and credit card debt have much higher interest rates than mortgages. Consolidating all your debt into one low-interest mortgage helps you save money by reducing your overall payments.
4. Streamline refinance
Streamline refinancing helps borrowers refinance their home with less time and hassle. Refinancing your home with this mortgage can only happen with your existing lender. Since your lender has all the needed information, you can get a new loan without credit checks and property appraisal. This mortgage option is available for conventional, VA, and FHA loans.
Mortgage Refinancing Requirements
There’s no doubt that the right refinance deal can bring you many financial benefits. But not everyone can qualify for mortgage refinancing. You must own enough equity in your home and have a low debt-to-income (DTI) ratio to be eligible for traditional refinancing loans. Here are some general requirements you should meet to be able to refinance your mortgage:
- At least a 20% equity in your home
- A DTI ratio that is below 43%
- A credit score of at least 620 for refinancing a conventional loan
- A credit score of 580-620 for refinancing government-insured loans
- Sufficient cash to cover the loan’s closing costs
Refinance Your Home With Standard Lenders
Refinancing can be much harder than getting your first mortgage. However, this should not stop you from trying to get a better deal. Whether you want to refinance your house to get lower rates or need more cash to live comfortably in retirement, Standard Lenders will work with you every step of the way to make the refinancing process as hassle-free as possible.
We’ll leverage our mortgage expertise and industry connections to find you the best refinancing programs available in California. Our government-licensed counselors will connect with you via phone, email, and within the comfort of your home to educate you on all your options so you can make an informed decision. Contact us now to refinance your home in no time.
Common Questions About Mortgage Refinancing
When is a good time to refinance my mortgage?
You should consider traditional refinancing if it helps you save more money in the long term or frees up cash to improve your quality of life. As a general rule, it’s a good idea to refinance your mortgage if the new interest rate is 1% or more below your existing rate.
How long should I stay in my house after refinancing?
It depends on your mortgage contract. Some mortgages have owner occupancy clauses and prepayment penalties which can prevent you from renting and selling your house for a specified period or make it expensive to do so. If you don’t have these clauses, you can rent or sell your property right after refinancing.
Does refinancing affect my credit?
Refinancing your home can affect your credit score in a number of ways. The act of closing one loan and opening another shortens your credit history, which makes up 15% of your score. Multiple refinancing applications and lender inquiries into your credit history can also lower your score.
Can I lose my home in a refinance?
Yes. If you fall behind on mortgage payments, some lenders will foreclose your home to recover their money. Standard Lenders’ Flexible Reverse Mortgage Program helps you maintain title and ownership of property for the rest of your life even if you fail to make loan payments.