Should you refinance your mortgage?
A new loan can lower your payment, free up cash, or drop mortgage insurance. Here is how to tell if it is worth it.
- A lower payment
- Cash from your equity
- A local lender we trust
Want to talk with a lender about your options?
Tell us how to reach you and we will introduce you to our preferred lender. Asking costs nothing, nothing is shared until you say so, and you are free to use any lender.
- A straight answer on whether it pays
- Your break-even month, after closing costs
- Cash-out, rate, and term options side by side
Optional. You are free to use any lender.
How does refinancing work?
It is a new loan that pays off the old one. Most refinances close in about a month.
- You talk with the lender
They look at your rate, your balance, and what you want: a lower payment, cash out, or a shorter term.
- You see the numbers
A loan estimate shows the new rate, the payment, and every closing cost, so you can see your break-even month.
- You close on the new loan
The home is appraised if needed, you sign, and the new loan pays off the old one.
When does refinancing make sense?
Refinancing makes sense when what you save is more than what the new loan costs, and you stay in the home long enough to come out ahead. Divide the closing costs by what you save each month: that is how many months it takes to break even. If you plan to stay well past that, it is worth a closer look.
A lower rate is the usual reason, but not the only one. Owners also refinance to take cash from their equity for a remodel or a pool, to pay off higher interest debt, to move from an adjustable rate to a fixed one, to shorten a 30 year loan to 15, or to drop the mortgage insurance on an FHA loan once they have enough equity.
What does a refinance cost?
Closing costs commonly run 2 to 5 percent of the loan: the lender's fees, an appraisal, title and escrow, and recording. Some lenders fold the costs into the loan or the rate. That lowers what you pay up front, but you pay it back over time, so compare the total.
How much equity do I need?
For a regular rate and term refinance, many conventional loans allow as little as 5 percent equity, though 20 percent avoids mortgage insurance. A cash-out refinance usually has to leave you with at least 20 percent equity. VA loans have their own rules, and your lender can tell you which fit.
What will the lender ask for?
Most of it is the same as when you bought. Have these ready and it moves fast.
- Your current mortgage statement
The balance, the rate, and who services the loan.
- Proof of income
Recent pay stubs and two years of W-2s, or two years of tax returns if you are self-employed.
- Bank statements
The last two months, all pages, for the accounts you will use for closing costs.
- Homeowners insurance
Your current policy, which the new lender will be added to.
- HOA details, if you have one
The association's name and dues. Most Las Vegas homes are in an HOA, and the lender will ask.
- Photo ID
Give your ID and Social Security number to the lender directly, never by plain email.
Refinancing questions
How do I know if refinancing is worth it?
Divide the closing costs by what you save each month. That is your break-even point in months. If you plan to stay in the home well past it, refinancing usually pays.
How much lower does the rate need to be?
There is no fixed rule. A smaller drop can still pay on a large balance, and a bigger drop may not pay if you move soon. The break-even month is the better test.
What is a cash-out refinance?
A new loan for more than you owe, with the difference paid to you in cash. Owners use it for remodels, a pool, or paying off higher interest debt. It usually has to leave you with at least 20 percent equity.
Can I drop mortgage insurance by refinancing?
Often, yes. FHA mortgage insurance can last the life of the loan, so owners with enough equity refinance into a conventional loan to drop it. Conventional mortgage insurance can usually be removed once you reach 20 percent equity, without a refinance.
Does refinancing hurt my credit?
The credit check can lower your score a few points for a short time. Under current scoring, mortgage checks within a short shopping window count as one, so comparing lenders does not stack up.
How long does a refinance take?
About 30 to 45 days in most cases, longer if an appraisal or a busy season slows things down.
Do I have to use your lender?
No. Our preferred lender is optional, and you are free to use any lender you choose.
What can you look at now?
Questions about your mortgage or your home's value?
Tell us what you are after and we will reply the same day with real answers, not a drip campaign.
