Refinancing your mortgage loan can help you get lower interest rates to reduce your monthly payments. Compare our top lenders and find the best refinance rates for you. Lower interest rates mean that you can save real money on your mortgage. Compare our top-tier providers and find the best refinance rates for you.
Introduction to Mortgage Refinancing USA
With interest rates still hovering near-record lows in 2022, now is a great time to consider a mortgage refinance. The best mortgage refinance companies replace your old loan with a new loan with a lower rate and lower monthly payments. The end result: you cut down on your monthly expenses and save a lot more money over the life of your loan.
Before seeking out the best company to refinance your mortgage, know that it only makes sense to refinance if your new interest rate is substantially lower than your old one. The reason for this is that each time you refinance a mortgage, you have to pay new closing costs worth 2-6% of your loan amount. In the first few years after purchasing, a 0.75% to 1% interest rate reduction should be enough to deliver savings, while in the mid-to-late years of the repayment term, a 1-2% lower interest rate is needed.
Types of Mortgage Refinance Products
A standard mortgage refinance follows the same rules as a standard purchase loan, with a choice of a conventional loan or a government-backed loan such as an FHA loan or VA loan. Basically, you select who you think is the best company to refinance your mortgage. Then, you select the mortgage product that suits you and use it to take out a new loan, replacing your old loan. The maximum loan-to-value (LTV) on a standard refinance ranges from 80-97%, depending on the lender and loan type.
A cash-out refinance is when the new mortgage is greater in value than what you owe on the old loan, allowing you to cash out the difference. A cash-out refi can be used for any purpose such as paying off debt, paying tuition fees, making home improvements, or putting money away for a rainy day. The best refinance companies generally offer cash-out options.
As mentioned in the intro, refinancing involves 2-6% closing costs, just like a regular mortgage. However, you can skip having to pay upfront closing costs through what’s known as a no-cost refinance. The way it works is that the lender agrees to waive upfront closing costs in return for your commitment to spread the costs over the life of the loan. If you’re short on cash, then this is the best way to refinance a mortgage.
A streamline refinance refers to the refinance of an existing FHA streamline loan (a type of FHA mortgage loan requiring limited borrower credit documentation). A streamline refinance reduces the time and costs to get a refinance. To qualify, your original mortgage must have been an FHA loan, the mortgage must be current (not delinquent), and the refinance must result in a benefit to you (by law, the lender cannot put you in a worse position in regards to the interest rate or repayment term).