How does a mortgage loan refinance work?
A mortgage loan refinance lets you start fresh on your home loan. When you refinance your mortgage, you take out a new loan that pays off your old one. You may be able to snag better loan terms or a lower interest rate on your new mortgage loan as well.
Why should you refinance your mortgage loan?
Lower your interest rate
If rates have dropped, you’ve built equity or your credit has improved, you may qualify for a better mortgage rate.
Decrease monthly payments
If you need wiggle room in your current budget, extending your loan term can lower monthly payments. But with a longer loan term, you’ll likely pay more interest over time.
Help pay off your loan faster
Shortening your loan term can help you build equity faster, pay off your mortgage sooner and save on interest.
When is it a good idea to refinance your mortgage loan?
You may want to refinance your mortgage loan if interest rates have dropped or if you have a better credit score than you did when you initially applied. If you would end up with a higher interest rate or plan on moving before you could recoup closing costs, it may not be worthwhile.
See if refinancing makes sense for you
Your current home loan
Refinancing may not impact your monthly mortgage payments but could cost you $0.00 in total interest.
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Take a closer look at home loan refinancing
Still have burning questions about interest rates or closing costs? We’ve got you covered with a host of in-depth articles on every step of the home-buying journey.
Looking for more from your home?
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Determine how much cash you may be able to pull out of your home’s equity when refinancing.
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Mortgage Payoff Calculator
Mortgage loan refinance FAQs
While each lender may have its own eligibility requirements, you generally need a strong credit score, low debt-to-income ratio, proof of income and some home equity to qualify for a mortgage loan refinance.
Yes, as long as you have enough equity in your home, you may get a cash-out refinance. In a cash-out refinance, you take out a new loan that's larger than the amount you currently owe on your mortgage. You use the new loan to pay off your old mortgage. You receive the remaining difference between the loans as a lump sum, which comes out of your home equity. Then, you begin repaying the new loan according to your new term.
The time it takes to refinance a mortgage can vary depending on the lender’s process, current market conditions and other unforeseen circumstances that may cause delays. On average, refinancing takes between 30 to 45 days from application to closing.
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