Mortgage Refinance FAQs

We have the answers to the most common mortgage refinance questions.

Have questions about how to apply for a mortgage refinance?

We have answers. Please feel free to reach out directly to our loan officers if you have further questions. We look forward to hearing from you!
A mortgage refinance is when a homeowner gets access to a new mortgage loan to replace the existing one.The reasons for this could include getting a lower rate, reducing the term of the loan, access the equity built up in the house for cash, or cancelling mortgage insurance premiums.
There are essentially two different ways to refinance your home loan:

1. Cash-out refinance - This replaces your current mortgage with a new one for a higher loan amount that includes both the original loan balance and an additional portion towards closing costs, if applicable, and cash to you. You are basically using the equity you’ve built up with your house to go towards other things you need, like home improvements or college tuition.
2. Rate and term refinance - Rate and term refinancing is done to either change the interest rate of the loan if the market rate is lower than the current loan rate, or change the term of the loan.
There are a number of reasons that homeowners want to refinance their current mortgage loan. Here are the most common:

1. Your current mortgage has rates well above the current market
2. You want to switch from an adjustable-rate loan to a more secure fixed-rate loan
3. You want to lower payments for improved cash flow
4. You have equity built up in your home and you need access to cash
Cash-out refinancing replaces your current mortgage with a new one for a higher loan amount that includes both the original loan balance and an additional portion towards closing costs, if applicable, and cash to you. You are basically using the equity you’ve built up with your house to go towards other things you need, like home improvements or college tuition. There are some minimum requirements to be met, but if you need cash and you have built up equity in your home, this could be a solution for you. Here's more information about cash-out refinancing.
Rate and term refinancing is done to either change the interest rate of the loan if the market rate is lower than the current loan rate, or change the term of the loan. Here's more information on rate and term refinancing.
You should not refinance your current mortgage if:

1. You have had your mortgage for a long time and most of your payments are being applied to principal 
2. Your current mortgage has a prepayment penalty if you pay your loan off early
3. If you are planning to move in the next few years

This refinancing calculator helps determine if refinancing is worth it.
How much equity you need to refinance depends on the type of loan and the lender. Some lenders require at least 20% equity, while others only 5%. At NASB, if you meet certain requirements, you can get a cash-out refinance with up to a 95% loan-to-value. Read here to find out more about cash-out refinancing options up to 95% LTV.
Refinancing includes closing costs, which can range from 2% to 5% of the mortgage balance. Here's a tool calculates your mortgage refinance closing costs for a given set of loan terms. The calculator lumps settlement charges into two categories: origination charges and other settlement services.
To refinance you will be going through essentially the same process as when you created your first mortgage loan, so having good credit will play a role. Having bad credit can prevent you from getting a refinance with a conventional lender's requirements, but you still may be able to get a refinance using an FHA loan.
Once you decide that you would like to refinance your home loan for whatever reason, the first thing to do is to shop around for the best rate. And getting the best rate means having a good credit score, so you'll want to know what that is, and see if you can get it as high as possible. You'll also want make sure you can pay any up-front and closing fees associated with the loan. Here's a blog that can tell you more about getting started with a refinance loan.
Streamline refinancing is a mortgage refinancing process that reuses the original mortgage loan's paperwork to allow for quicker refinancing approval. This option is popular for borrowers who want to take advantage of lower interest rates or get out of an adjustable rate mortgage. Streamline mortgages are offered through both the VA and FHA.
Cindy L.
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