Refinancing is Easier Than You Think

What is mortgage refinance?

Refinancing is the process of paying off your existing mortgage with a new mortgage. Typically, you refinance your mortgage to reduce your interest rate and monthly payment or change the length (or term) of your mortgage. You may also refinance to take cash out from your home's equity.

Glossary Terms

HARP Program
The Home Affordable Refinance Program (HARP) was created by the federal government in April of 2009 to allow eligible homeowners with little home... <a href='/glossary/what-is-harp-program' title='See the full definition of HARP Program'>read more</a>
Cash-Out Refinancing
A refinance in which the new loan amount exceeds the total needed to pay off the existing mortgage. The difference goes to the borrower and can be... <a href='/glossary/what-is-cash-out-refinancing' title='See the full definition of Cash-Out Refinancing '>read more</a>
Home Equity
Home equity is the difference between the market value of a home and any outstanding mortgage balance(s). A homeowner with a $200,000 property and a... <a href='/glossary/what-is-home-equity' title='See the full definition of Home Equity'>read more</a>
Interest Rate
The percentage of a loan amount that it costs to borrow money. <a href='/glossary/what-is-interest-rate' title='See the full definition of Interest Rate'>read more</a>
Rate and Term Refinancing
A mortgage refinance that replaces the existing mortgage with a new one but does not disburse cash to the borrower. Rate and term refinancing is... <a href='/glossary/what-is-rate-and-term-refinancing' title='See the full definition of Rate and Term Refinancing'>read more</a>
Refinance
Refinancing means replacing one loan with a new, better loan. Improving the terms of a loan can mean obtaining a lower interest rate, a lower monthly... <a href='/glossary/what-is-refinancing' title='See the full definition of Refinance'>read more</a>

This guide covers the topic of how to refinance a mortgage in five simple steps. There are many reasons for refinancing a mortgage -- the most common being interest rate reduction, lowering payments, converting adjustable loans to fixed loans, cashing out home equity, payoff acceleration and dropping mortgage insurance coverage. The first step, then, is determining whether refinancing a home will help the consumer achieve his or her goal.

Step One: Goal Determination

Refinancing can involve some compromise -- obtaining the lowest rate means paying higher fees, for example. Lowering the payment can involve stretching out the remaining balance over a longer term, which could mean higher interest expense over the life of the loan. Accelerating the mortgage payoff means accepting higher monthly payments. The first step, then, is determining the goal of the refinance and if it can be achieved under current market conditions. For example, if a homeowner wishes to obtain a lower rate, he or she can compare the current rate to real-time rates from competing lenders with LendingTree's LoanExplorer tool.

Step Two: Lender Selection

There are several ways to find mortgage lenders, but the most efficient method is by obtaining quotes online. This allows the borrower to request and receive information quickly. That's vital because mortgage rates change continually as financial markets move. Quotes received hours apart may not be useful if bond prices are changing quickly. The homeowner should check pricing and then interview several lenders with competitive rates.

Step Three: Program Choice

Most refinancing goals can be met with more than one program, and a knowledgable loan professional can help borrowers winnow out the most appropriate program for their needs. For example, homeowners desiring smaller payments can achieve them by finding a lower interest rate, stretching out their remaining balance over a longer term or choosing an interest-only loan. The loan officer should assess the borrower's risk aversion, expected tenure in the home, and plans like retirement or starting a family.

Step Four: Refinance Application

Refinancing a mortgage involves a mortgage application. Today, most loan officers or processors interview applicants and complete the forms for them. Applicants should provide statements from bank and investment accounts, their most recent two pay stubs and W-2s (for salaried employees) or tax returns (for income from commissions, self-employment or investments). A mortgage underwriter (human or automatic) may request additional documents like divorce decrees, business licenses or letters explaining credit issues. Credit reports are pulled and unless the refinance is a streamline product, the property is appraised. The efficiency of the lender and experience of the loan officer are crucial, so borrowers should interview lenders and check their reputations. LendingTree provides ratings and reviews of lender partners to help customers find the right company for the job.

Step Five: Lock and Close

The final step is locking in a mortgage refinance rate and closing the loan. Locking a rate can be done at any time during the refinance process. Until the interest rate is locked, borrowers are said to be "floating" their mortgages. Once a rate is locked, it is guaranteed until the lock expires -- unless there are "material" changes to the application, such as the borrower choosing a different program or the home appraising for less than expected. Borrowers who are floating their mortgages can check current mortgage rates before deciding to lock or continue floating. At closing, the final costs of the refinance are reconciled to the costs disclosed when the loan was locked. The actual costs cannot exceed the disclosed costs by more than allowed by law or the lender has to absorb the excess.

Closing a refinance differs from closing a purchase. If refinancing a primary residence, there is a three business day rescission period after the borrower signs the final documents. This is a cooling off period in which the borrower can back out of the refinance for any reason. Once that period expires, the refinance loan is funded and the old loan is paid off.

 

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Refinance rates now in Woodbridge, NJ [Change this]

  • ?
    Home Price (Purchase)
    When you get a mortgage to purchase a home, the lender uses the lower of the agreed-upon purchase price or the property's appraised value to determine your maximum loan amount. The loan amount divided by the property home price equals your loan-to-value ratio, or LTV. That ratio is one of the major factors that lenders use to set your mortgage rate. If your LTV exceeds 80 percent, you'll probably be required to pay mortgage insurance, which increases your monthly payment. If the property appraises for less than the agreed-on purchase price, you are not usually required to complete the purchase.
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    Home Value (Refinance)
    This is your estimate of the current value of your property. When you refinance, your home is almost always evaluated by a licensed appraiser. The refinance loan amount divided by the property's appraised value equals your loan-to-value ratio (LTV), and that number is one of the major factors that determine your mortgage rate. To get an accurate refinance rate quote, your home value estimate must be reasonably accurate.
  • ?
    Down Payment
    The down payment is the amount you pay upfront when you finance property. Your purchase price minus your down payment equals your mortgage amount. The higher your down payment, the more likely you are to be approved for a home loan. If your down payment is less than 20 percent of the purchase price, you'll probably be required to pay for mortgage insurance, which increases your monthly payment.
  • ?
    Credit Score
    Your credit score is a number designed to measure your credit-worthiness. It's based on a formula that combines many factors, including your payment history, amount of credit used and number of accounts. This number is used by lenders to calculate the probability that you'll default on your mortgage. Most lenders won't approve mortgages to applicants with credit scores lower than 620. Your credit score is one of the most important factors that determines your mortgage rate - applicants with higher scores are offered better mortgage rates.
  • Refresh Rates

30 Year Fixed

Interest Rate
3.125%
APR
3.266%
Monthly Payment
$857
Sebonic Financial
30 Year Fixed
Interest Rate
3.125%
APR
3.266%
Monthly Payment
$857
(844) 325-1147 Contact
Sebonic Financial
Email Lender

Offer Details

Home Value $250,000
Requested Loan Amount $200,000
Lock Period 30 Days
Down Payment $0
Principal and Interest Payments $857
Estimated Mortgage Insurance Payments $0
Total Monthly Mortgage Payment $857
Lender Fees $3,541
Lender Credit $0
Total Closing Fees* $3,541
*Other 3rd party fees may apply
Sebonic Financial
Email Lender

About the Lender

Sebonic Financial is a division of Cardinal Financial Company, a full service mortgage banking firm in operation since 1987.  The company is an approved seller/servicer for Fannie Mae, Freddie Mac and Ginnie Mae. Cardinal is also an approved lending institution for the Department of Housing and Urban Development/Federal Housing Administration and the Department of Veteran Affairs/Veterans Administration with FHAs Direct Endorsement and VA Automatic Lender Authority.  Cardinal is an authorized lender for the USDA/Rural Housing Program, the Pennsylvania Housing Finance Agency and the New Jersey Mortgage Housing Finance Agency.

 

Cardinal is licensed by the Departments of Banking in many states, mainly in the eastern and southeastern United States.  Its retail and wholesale divisions originate first mortgage loans for qualified borrowers.

Sebonic Financial
Email Lender Write a Review

Lender Reviews

John Roberts - recommend!

Yes, I recommend this lender

Good job! Patient and helpful.

By: Ben (Seattle, WA)

recommend Sebonic

Yes, I recommend this lender

great rate, low cost, responsive and flexible

By: Ben (Seattle, WA)

Knowledgeable Loan Originator

Yes, I recommend this lender

Yll was very helpful and efficient in locking in a rate for us when shopping for a home. He showed attention to detail and obviously had extensive knowledge in dealing with unusual mortgage situations. We had an unusual buyer credit situation and he seemed very competent in handling it. Ultimately, we opted to select another lender due to the fact that this lender has handled two prior transactions for us, but Yll offered a more competitive rate. I have no doubt that he takes care in walking buyers through the financial and closing process.

By: Dustin (Denver, CO)
See All Reviews

15 Year Fixed

Interest Rate
2.375%
APR
2.616%
Monthly Payment
$1,322
Sebonic Financial
15 Year Fixed
Interest Rate
2.375%
APR
2.616%
Monthly Payment
$1,322
(844) 325-1147 Contact
Sebonic Financial
Email Lender

Offer Details

Home Value $250,000
Requested Loan Amount $200,000
Lock Period 30 Days
Down Payment $0
Principal and Interest Payments $1,322
Estimated Mortgage Insurance Payments $0
Total Monthly Mortgage Payment $1,322
Lender Fees $3,377
Lender Credit $0
Total Closing Fees* $3,377
*Other 3rd party fees may apply
Sebonic Financial
Email Lender

About the Lender

Sebonic Financial is a division of Cardinal Financial Company, a full service mortgage banking firm in operation since 1987.  The company is an approved seller/servicer for Fannie Mae, Freddie Mac and Ginnie Mae. Cardinal is also an approved lending institution for the Department of Housing and Urban Development/Federal Housing Administration and the Department of Veteran Affairs/Veterans Administration with FHAs Direct Endorsement and VA Automatic Lender Authority.  Cardinal is an authorized lender for the USDA/Rural Housing Program, the Pennsylvania Housing Finance Agency and the New Jersey Mortgage Housing Finance Agency.

 

Cardinal is licensed by the Departments of Banking in many states, mainly in the eastern and southeastern United States.  Its retail and wholesale divisions originate first mortgage loans for qualified borrowers.

Sebonic Financial
Email Lender Write a Review

Lender Reviews

John Roberts - recommend!

Yes, I recommend this lender

Good job! Patient and helpful.

By: Ben (Seattle, WA)

recommend Sebonic

Yes, I recommend this lender

great rate, low cost, responsive and flexible

By: Ben (Seattle, WA)

Knowledgeable Loan Originator

Yes, I recommend this lender

Yll was very helpful and efficient in locking in a rate for us when shopping for a home. He showed attention to detail and obviously had extensive knowledge in dealing with unusual mortgage situations. We had an unusual buyer credit situation and he seemed very competent in handling it. Ultimately, we opted to select another lender due to the fact that this lender has handled two prior transactions for us, but Yll offered a more competitive rate. I have no doubt that he takes care in walking buyers through the financial and closing process.

By: Dustin (Denver, CO)
See All Reviews

5/1 ARM

Interest Rate
2.750%
APR
3.474%
Monthly Payment
$964
Sebonic Financial
5/1 ARM (FHA)
Interest Rate
2.750%
APR
3.474%
Monthly Payment
$964
(844) 325-1147 Contact
Sebonic Financial
Email Lender

Offer Details

Home Value $250,000
Requested Loan Amount $203,500
Lock Period 30 Days
Down Payment $0
Principal and Interest Payments $831
Estimated Mortgage Insurance Payments $133
Total Monthly Mortgage Payment $964
Lender Fees $5,628
Lender Credit $0
Total Closing Fees* $5,628
*Other 3rd party fees may apply
Sebonic Financial
Email Lender

About the Lender

Sebonic Financial is a division of Cardinal Financial Company, a full service mortgage banking firm in operation since 1987.  The company is an approved seller/servicer for Fannie Mae, Freddie Mac and Ginnie Mae. Cardinal is also an approved lending institution for the Department of Housing and Urban Development/Federal Housing Administration and the Department of Veteran Affairs/Veterans Administration with FHAs Direct Endorsement and VA Automatic Lender Authority.  Cardinal is an authorized lender for the USDA/Rural Housing Program, the Pennsylvania Housing Finance Agency and the New Jersey Mortgage Housing Finance Agency.

 

Cardinal is licensed by the Departments of Banking in many states, mainly in the eastern and southeastern United States.  Its retail and wholesale divisions originate first mortgage loans for qualified borrowers.

Sebonic Financial
Email Lender Write a Review

Lender Reviews

John Roberts - recommend!

Yes, I recommend this lender

Good job! Patient and helpful.

By: Ben (Seattle, WA)

recommend Sebonic

Yes, I recommend this lender

great rate, low cost, responsive and flexible

By: Ben (Seattle, WA)

Knowledgeable Loan Originator

Yes, I recommend this lender

Yll was very helpful and efficient in locking in a rate for us when shopping for a home. He showed attention to detail and obviously had extensive knowledge in dealing with unusual mortgage situations. We had an unusual buyer credit situation and he seemed very competent in handling it. Ultimately, we opted to select another lender due to the fact that this lender has handled two prior transactions for us, but Yll offered a more competitive rate. I have no doubt that he takes care in walking buyers through the financial and closing process.

By: Dustin (Denver, CO)
See All Reviews
Mortgage rate quotes displayed on LendingTree LoanExplorer℠, including loan pricing data, rates and fees, are provided by third party data providers including, but not limited to, Mortech®, a registered trademark of Zillow®, LoanXEngine, a product of Mortgage Builder Software, Inc., and LoanTek, Inc.

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