Do you have the best refinance rate?

Whether you want to lower your monthly mortgage payments, pay off your mortgage faster or get cash from your home, LendingTree’s marketplace will help you land the best deal for your refinance.  

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Refinance your mortgage

What is refinancing?

Refinancing is simply the process of replacing your existing mortgage with a new loan that has better terms. Those better terms could include a lower interest rate, shorter loan term or smaller monthly payment. The new loan pays off the old loan, and you start making payments on the new loan. 

You must meet lender requirements to qualify for a mortgage refinance, which we’ll discuss later.

How LendingTree can help you refinance

Shopping around can save you money when buying a home, and the same is true when refinancing your existing loan. At LendingTree, we make this process easier by doing the shopping for you. By comparing lenders and having them compete for your business, you’re certain to get the best rate possible on your mortgage refinance. The better your rate, the lower your payments will be and the more money you’ll save in interest over the life of your loan.

Benefits of refinancing

Lower your payment
Adjust your loan term
Take cash (equity) out of your home
Convert a variable rate to a fixed rate
Lower your interest rate

How to qualify for a refinance

Many eligibility requirements related to getting a mortgage also apply to the refinance process.
  1. Minimum credit score: In many cases, you’ll need at least a 620 credit score. However, aim for a 740 score or higher to qualify for the best refinance rates available. 
  2. Maximum loan-to-value ratio: Your loan-to-value (LTV) ratio, which is the percentage of your home’s value being financed by the mortgage, can’t exceed 97% for a traditional refinance. The maximum LTV ratio allowed for cash-out refinances is 80%.
  3. Maximum debt-to-income ratio: Your debt-to-income (DTI) ratio, which is the percentage of your gross monthly income used to make your debt payments, should be at 45% or lower. Be sure to factor in both your non-mortgage debt and the estimated monthly mortgage payment you expect to have with the refinanced mortgage.

Although it’s possible to refinance with a high LTV ratio, you’ll need to have an 80% LTV or lower to avoid paying for mortgage insurance.

Mortgage refinance checklist

You’ll also need to have these documents handy to refinance your mortgage:

  • Your identity: Social Security number and photo ID

  • Your income: Three most recent pay stubs and W-2s for the last two years

  • Your assets: Investment and retirement account statements

  • Your debts: Two most recent bank statements, credit card and loan statements, child support or alimony payments, homeowners insurance, property tax bills

Home Loan Refinance Rates

How much does it cost to refinance?

Whenever you borrow a loan, there are closing costs and fees associated with the transaction. Refinance closing costs can range from 3%-6% of your new loan amount, but vary by lender and location. 

Typically, the costs you’re responsible for can include an application fee, loan origination fees, an appraisal fee and more. You can use LendingTree’s refinance calculator to determine your breakeven point, or the point at which the savings on your mortgage will cover the cost of the refinance. 

Mortgage Refinance Calculator

7 steps to refinancing your mortgage

  1. Determine why you want to refinance. Have interest rates dropped significantly? Has your creditworthiness drastically improved? Have home values increased?
  2. Shop around to find the right lender. Use LendingTree’s marketplace to get mortgage refinance quotes and check out our list of the best refinance lenders. You should also ask family and friends for recommendations.
  3. Gather your documentation and apply for a loan. Have your asset, debt, employment and income paperwork ready and fill out a refinance application with two or three lenders.
  4. Compare your Loan Estimates. Each lender you apply with will give you a Loan Estimate within three business days of receiving your application. Review each document and compare interest rates, monthly payments, closing costs and other fees to determine which lender has the best deal for you.
  5. Prepare for an appraisal. Once you choose your lender and your application goes to the processing and underwriting phases, your lender will order a home appraisal to verify the property value makes sense for the new loan amount.
  6. Take advantage of a rate lock. Lock in your mortgage rate about a week before you’re scheduled to close on your new mortgage. This allows you to secure a specific mortgage rate that won’t change before the deal is sealed, as long you close on the loan before the rate lock expires.
  7. Close on your new loan. Once you have a date set for the mortgage closing, you’ll finalize the transaction by paying your closing costs and signing all necessary documents.

Differences between a cash-out and traditional refinance

With a cash-out refinance, you borrow a new loan that exceeds the amount you need to pay off your existing loan and take out the difference in cash. This type of refinance might work for you if you want to:
  • Boost your emergency fund

  • Cover higher education expenses

  • Make improvements or repairs to your home

    • Pay off high-interest-rate debt, such as credit cards 

Keep in mind that because your new mortgage will have a higher balance than the old loan, your monthly mortgage payment will likely increase. 

A traditional refinance involves replacing your existing mortgage with one that has a new interest rate and loan term, but you typically don’t receive cash from the transaction. This type of refinance could work if your goal is to:
  • Convert an FHA loan to a conventional loan

  • Lower your mortgage interest rate

  • Shorten your loan term

  • Stretch out your loan term

  • Switch from an adjustable-rate mortgage to a fixed-rate mortgage

Reasons for cash-out refinance include:

Pay off your credit cards or high interest debts
Purchase a car
Make home improvements or repairs
Pay for college expenses
Create emergency funds

Mortgage Comparison Shopping Report - August 27th

Each week, LendingTree reports how much consumers can save by comparing rates during the loan-shopping process. We describe these savings in two ways to provide the most detailed data possible on mortgage rates. The LendingTree Mortgage Rate Distribution details the range of mortgage interest rates on offer. The Mortgage Rate Competition Index is the median spread between the lowest and highest APRs offered by lenders in our marketplace.

For the week ending Aug. 25, 2019, the share of borrowers with rates under 4% was at 61.9% and the mortgage refinance rate competition index was 1.21.

61.9%

of mortgage refinance borrowers received offers of 4% or less for 30-year, fixed-rate mortgage refinances, down from 62.8% last week. A year ago, 0% of refinance offers were under 4%.

$57,864

is how much you would save over 30 years on a $300,000 loan, when you can get a mortgage refinance APR 1.21 percentage points lower than the competition.

3.75%

was the most common interest rate across all 30-year, fixed-rate mortgage refinance applications on LendingTree. This rate was offered to 19.9% of borrowers.

  • Across all 30-year, fixed-rate mortgage refinance applications on LendingTree, the index was 1.21.

 

Read the full report here.

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