Are you having trouble making your monthly mortgage payment or balancing debt and home insurance payments? Refinancing can be the solution to your mortgage woes. Let’s take a look at some of the benefits of refinancing — and how you can get started on your refinance with one of the best refinancing companies.
Quick Look: Best Mortgage Lenders for Refinancing
- Best for Simple Refinancing: Rocket Mortgage®
- Best for Lowering Your Interest Rate: Better.com
- Best for Personal Refinancing Solutions: Flagstar
Benefit 1: You Might Be Able to Secure a Lower Interest Rate
If interest rates are lower now than when you bought your home, you can often save thousands of dollars by refinancing. When you refinance your loan, you lock into today’s interest rates. Reducing what you pay in interest by even a fraction of a percent can save you a lot of money by the time you finish paying off your home.
For example, let’s say that you have a loan with a principal balance of $150,000, 20 years left on your term and an APR (annual percentage rate) of 4%. Now, imagine that today’s rates are around 3.5%. If you refinance your loan to today’s interest rate, you’ll pay a total of $58,785.50 by the time you pay off your loan. If you don’t take the refinance, you’ll end up paying $68,152.95. This means that by refinancing to a rate that’s just half a percentage point lower, you save over $9,300 by the time you own your home.
Mortgage interest rates change on a daily basis. Know your current interest rate and keep tabs on how rates change in your area. This can help you refinance when rates are lowest — and save you the most money possible.
Benefit 2: Refinancing Allows You to Customize Your Mortgage Payment
A mortgage is a major commitment — you might make payments on your mortgage for 30 years or more. It’s totally normal for your lifestyle to change over the course of your mortgage term. Refinancing allows you to adjust your mortgage terms and payments to fit your current needs as a homeowner.
One of the most common reasons you may want to refinance your mortgage is to lower your monthly payment. When you refinance to a longer term, you lower the amount of money you need to pay to your mortgage company each month. Lengthening your term results in you paying more in interest by the time you own your home but it can be an excellent solution to help you stay in your home if you lose your job or you encounter an unexpected medical bill.
You can also shorten your mortgage term and take on a higher payment. When you shorten your mortgage term, your monthly payment will significantly increase. However, you’ll own your home sooner, and you’ll often save tens of thousands of dollars in interest. Shortening your mortgage term can be an ideal solution if you’re now earning more money than you were when you bought your home.
Benefit 3: You Can Use Your Home Equity to Pay Off Debt
Most Americans have some kind of debt independent of their mortgage balance. From credit card debt to student loans, most people aren’t totally debt-free. If you have outstanding debt accumulating interest, you can save money and free yourself from additional interest accumulation with cash out refinancing.
A cash-out refinance is a special type of mortgage refinance that allows you to access your home equity. Equity refers to the percentage of your home that you actually own. Every time you make a payment on your mortgage loan, you build equity in your property by paying down your principal loan balance. You accept a higher principal loan balance with a cash-out refinance and your lender gives you the difference in cash.
Cash-out refinances are useful because mortgage loans offer one of the most affordable ways to borrow money. The average 30-year mortgage loan has an APR between 4% and 5%, while the average credit card has an APR of over 17%. When you take a cash-out refinance, you can pay down your high-interest debt and replace it with debt on your much more affordable home loan. This can save you thousands of dollars by the time you finally pay off your home.
Best Mortgage Lenders for Refinancing
Do you think that refinancing might be right for you? Let’s take a look at some of the best refinance mortgage companies you can work with.
1. Best for Simple Refinancing: Rocket Mortgage®
Rocket Mortgage®® understands that refinancing a mortgage loan can be confusing and stressful. The company’s team has streamlined the mortgage process as much as possible, simplifying the refinance process down to its bare bones. You can refinance a mortgage loan from your phone or tablet using Rocket Mortgage®®’s simple online process.
Just enter a bit of information on your loan and you’ll receive information on current rates. Rocket Mortgage® can be the best place to refinance a mortgage loan if you value convenience and simplicity above everything else.
In addition to refinancing, Rocket Mortgage®® also offers a variety of mortgage loan options, including both government-backed loans and jumbo loans.
- Simplified and convenient application process online
- Ability to customize and choose from various loan options
- Offers flexibility in mortgage payment options
- Limited in-person customer support
2. Best for Lowering Your Interest Rate: Better.com
Better.com is an online mortgage company that offers some of the most affordable refinance options available. By eliminating the lender’s fees and commissions traditionally associated with getting a refinance, Better.com is able to pass those savings along to you in the form of more affordable refinancing.
Getting a quote from better.com is simple. Just enter a bit of information on your home, loan and credit score — better.com will then serve you up-to-the-minute rate information and a number of loan refinancing options. This allows you to more accurately calculate your new mortgage payment by using the most accurate rates available.
Don’t want to spend ages trying to figure out which company is offering you the most affordable APR? You can rest easy with better.com’s Better Price Guarantee. If you find a more affordable APR from a competing mortgage refinance company, Better.com will help you beat it.
In addition to refinancing, better.com also offers FHA and conventional mortgage loans.
- Offers Price Guarantee
- Fast approval and funding process
- No application or origination fees
- Not available in all states
- May not be suitable for those who prefer face-to-face interactions
3. Best for Personal Refinancing Solutions: Flagstar
- securely through Flagstar Mortgage's websiteBest For:Specialized Loan ProductsRating:
Refinancing isn’t a one-size-fits-all solution. It can be comforting to know that the company handling your refinance takes a personalized approach to create a loan that works for you.
Flagstar is a unique mortgage company that specializes in custom loan solutions. The company employs a full team of “financial craftsmen” to help you create a loan that works with your income and debt repayment needs. If you value a high level of customer service from your refinance team, Flagstar might be the best mortgage company for you.
In addition to customized refinances, Flagstar also offers both government-backed and conventional mortgage loans.
- Multiple mortage loan options
- Provides both online and in-person loan assistance
- Limited physical branch locations
Before you refinance, you’ll need to make sure that you meet your lender’s standards to get a new loan. Let’s take a look at some of the basic requirements you’ll need to meet before you can secure a refinance.
Your Current Home Equity
Most lenders won’t allow you to refinance 100% of your loan’s value. As a general rule, you shouldn’t expect to be able to refinance more than 80% to 90% of your loan.
Before you apply for a mortgage refinance, you need to ensure that you have enough equity in your property to qualify. Contact your current lender and request a mortgage statement. Your mortgage statement will tell you how much of your principal you’ve paid down and how much equity you have. If you have less than 10% equity in your home, you’ll have a harder time finding a company for refinancing.
Your Credit Score
Every lender sets its own standards for the minimum credit score you’ll need to qualify for a refinance. Most lenders set this minimum at 620 points or higher. The good news is that if you’ve been making your mortgage payments on time, your score is likely higher than when you first got your loan.
Your Home Appraisal
Refinance lenders can’t offer you more money than your home is worth. You’ll typically need to pay for a new appraisal when you get a refinance.
Your Income and Assets
When you refinance, you usually pay off your current loan and take on a second mortgage loan with a new lender. Your new lender needs to know that you have the means to continue making your mortgage payments after it services your refinance. When you apply for a new loan, your lender will require you to submit much of the same financial information as when you got your original mortgage loan. Expect your lender to ask to see:
- Your last 2 bank statements
- Your last 2 W-2s
- Your last 2 pay stubs
If you’re self-employed, your lender will usually ask you for additional financial information.
Refinance interest rates change on a daily basis. Let’s take a look at some of the currently-available rates you’ll find from some of the country’s largest mortgage lenders.
*current rates as of 2/12/20
Refinance the Right Way
Getting started with a refinance doesn’t need to be time-consuming or complicated. Begin by getting a quote from your refinance company of choice. Don’t be afraid to leave yourself plenty of time to “shop around” for lower interest rates or fees. Find the most affordable refinance possible — understand all your options.
Frequently Asked Questions
How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
How much interest will I pay?
Interest that you’ll pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first time buyers. Check out the lenders that specialize in making the home buying experience a breeze.
Get Ready for Take Off
Rocket Mortgage® is an online mortgage experience developed by the firm formerly known as Quicken Loans®, America’s largest mortgage lender. Rocket Mortgage® makes it easy to get a mortgage — you just tell the company about yourself, your home, your finances and Rocket Mortgage® gives you real interest rates and numbers. You can use Rocket Mortgage® to get approved, ask questions about your mortgage, manage your payments and more.
You can work at your own pace and someone is always there to answer your questions — 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Give Rocket Mortgage® a try.