If you’re interested in the housing market, you’ve probably heard about mortgage refinancing. For many, the draw is securing a lower interest rate or a maturity date that’s better for them.
Refinancing a loan means taking out a new refinance loan to pay off the previous one, with new terms that suit you. The best refinance companies are easy to find; shop around and examine different lenders, their rates, terms and loan types. It’s important to find the best company for your needs.
Refinancing is great for getting a handle on your finances, largely through securing a more manageable interest rate bringing down your payments and helping build equity, the value of your home minus the amount you owe, faster. By refinancing to a better interest rate and shorter payoff time, more of your monthly payment will go towards the principal, not the interest. There are costs, so decide if mortgage refinance is right for you by weighing the benefits against the costs.
Many borrowers opt for cash-out refinancing, where they take out a loan for a larger amount than what the house is worth and keep the difference, often to pay off other loans—such as credit cards—which have higher interest rates. Cash-out refinancing can be used for any expenses, not just other debt.
Whether you're looking for a second mortgage or a cash-out refinance, it's important to compare the top companies to know which choices are best for you. Consider company reputation and credit requirements to find the lender for your mortgage refinance loan.
Minimum credit score: 620+
Great for comparing many loan options at a glance, LendingTree is an online marketplace with no hidden fees and free credit scoring. It offers 15- to 30- year refinance loans and has a network of over 350 lenders. Its website is easy to navigate and it's possible to see offers quickly and online. Lendingtree is ideal for busy mortgage refinance shoppers who want to see several options at a glance.
No fee for connecting users with a network of partners
Fill out one form and your information is sent to multiple lenders
Large network lenders, banks, and creditors
Receive a loan offer within minutes when you qualify
Additional details about a loan offer are easily accessed
Minimum credit score: 620+
JG Wentworth is a great choice for those needing their strong customer service and straightforward application. It offers primarily for those with good credit and is a leader in refinancing with its many options geared toward refinancing.
A variety of fixed and adjustable-rate refinance loans
Refinance homes at favorable rates
Take advantage of a variety of federal financing programs
An extensive library on mortgages
Online mortgage calculator
Outstanding customer support
Low origination fees
Offering fixed rate and adjustable rate mortgage, First Internet Bank is an excellent choice for standard and HARP refinance loans, as well as home equity loan programs. Offering rate watch, you can receive email updates with mortgage interest rates and calculate the numbers to decide if a refinance loan is right for you.
Online banking pioneer since 1999
Convenient tools for managing your refinance loan
Banking available in all 50 states
Improve your terms and rates
Build equity by paying the principal loan
Best rates come with good credit
Can receive cash payment
Be aware - Know your credit score so you have an idea what to expect from lenders. Ask the right questions from the mortgage refinance companies you are considering. You should have a credit score higher than 620, and above 700 will earn you the best rates.
Read up - Check our mortgage lender reviews and find the loan that works for you. Take into account your financial liquidity and lifestyle. Think about what you can comfortable pay each month and keep your debt to income ratio as low as possible; don’t pay much more than 30-40% of your income to the loan.
Shop around with the top local and online lenders - Look among the best loan companies for a good reputation. Compare rates and customer service reputation. Look at the interest rate that each lender is offering to you.
Mortgage refinance companies will base their rates on your credit rating and history. Check if your credit rating is high enough to negotiate a lower interest rate that will make refinancing worthwhile. If you are not getting quotes with rates you'd like, evaluate if now is the right time to refinance and work on getting a better quote down the line. Here’s how:
Does the mortgage refinance loan you qualify for justify the expenses of taking out a 2nd mortgage? Expect the following costs when you refinance and determine the true value of a lower interest rate after you've paid these expenses.
$200 to $250
$300 to $600
Loan origination and document prep fee
1% of the loan value
$200 to $400
$400 to $800
City recording fee
$25 to $250
$50 to $150
If you have poor credit, you may not qualify for a mortgage refinance with a super low interest rate and top terms, however you can prove to lenders that you're a reliable borrower and receive a new mortgage loan. If you want to lower your monthly payments and you have bad credit, refinancing your mortgage is still an option for you. Because your home is used as collateral for this loan, you'll receive better terms on a 2nd mortgage than you would on a personal loan or through using credit cards.
Here are 3 ways to refinance your mortgage with bad credit:
Prove your reliability. Highlight anything that proves that you're a responsible borrower and can make steady payments on your loan, like job consistency, regular raises, any savings or assets you may have.
Look into government loans. Even if you don't have a regular mortgage through a government program, the Department of Housing and Urban Development has several options available to help people who have trouble qualifying for typical loan modification. Look at loans like HARP and FHA Streamline loans, among others.
Find a co-signer. Consider asking a family member or close friend to co-sign your loan in order to improve your rates and terms. Consider someone with better credit and in a more stable financial position, and be sure they're aware of the responsibility co-signing carries.
The best mortgage refinance lenders generally do not approve loans to people whos original home loans are in default. Lenders want to know that you will be able to make your monthly payments, and may require certain income standards, or for the loan to be no more than a percentage of your income.
Once you’re interested in mortgage refinancing, it’s important to examine the costs. You should be able to pay the closing costs, which can include appraisal fees, prepaid interest or points, title search fees, title insurance and loan application fees. You will also need to pay closing fees for the attorney who brokers the exchange. These fees can each run into the hundreds of dollars, so it’s important to be ready to pay them before beginning the refinance process.
You should have already built some equity in your home; the loan amount should be smaller than the value of the property, typically by about 80%.
If these terms and requirements fit your situation, you may be ready to begin the process of a refinanced home loan.
Step 1: Check if it's cost effective. Before deciding if you should refinance it makes sense to determine if you will make up the costs of the fees through the money you’re saving in your monthly payments and if your credit score is good. If the interest rates are low enough, you can save a lot.
Step 2: Use a mortgage refinance calculator, like LendingTree's. You'll get a good idea of what kind of savings you are eligible for taking into account your credit, loan amount, and property value and equity. You'll also be able to see the costs broken down, so you know what you're really paying for.
Step 3: Look into government programs for refinancing. If you are struggling to pay your original mortgage due to financial hardship, you may qualify for a HARP refinance loan. Consider if your home value is smaller than the amount you owe because of market changes, and if you can still make monthly payments on a new refinance loan.
Step 4: Shop around. Compare the best mortgage refinance lenders, their rates and how long it will take you to pay of the loans they are offering you. Shop around for the right fit and apply to the one that suits you best.
Step 5: Have cash on hand. Set aside the money you'll need for property taxes, insurance, closing costs, lawyers fees and any other financial obligations you may be required to pay upfront when you take out the mortgage refinance loan.
Step 6: Prepare for closing. Bring your photo ID, the money you need for closing and any other documents your lender requests. You have a 3 day right of cancel, should you decide this loan is not right for you.
If you have some equity in your home and are looking for rates and terms that suit your current lifestyle more than your original mortgage loan terms do, refinance might be a great fit. It's important to take into account the costs and fees, as well as the new interest rate and maturity date. If the numbers add up, refinancing can help you wind up with cash in your wallet for other expenses or with lower monthly payments.