How to Find the Best Mortgage Lenders for Refinancing

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Best Mortgage Lenders for Refinancing

Every borrower should look into mortgage refinancing as it is a money-saving option. At any point, while you’re on the hunt for the best mortgage lenders for refinancing, a better financing option might arise. You may be able to take advantage of a low-interest rate. Whatever the case, consider refinancing a possibility. You can take out a new loan to cover your existing mortgage and save tons of cash as a result. Anyone who has taken out a mortgage loan at a not-so-advantageous rate has a chance to fix that decision. By regularly shopping around, you’re able to get the best mortgage rate possible.  

New homeowners often lack the knowledge and jump right in with the first mortgage offer. Sometimes it’s because of a lack of choice and generally high-interest levels. Life changes, and at any point, people can struggle to make their payments. You might have recently lost money, had a baby, or encountered another unexpected expense.

When things like this happen, keeping up with expensive mortgage rates gets hard. If the rate is not fixed, for example, it could be an absolute nightmare for any family. Financially unstable economic periods only increase the hardship. Repaying a mortgage doesn’t always have to be this tough. Once in a while, you get an opportunity to correct any mistakes you might have made previously. Being able to lower your payments significantly is too good to miss. 

Choosing to Refinance Your Mortgage

Just because you can, however, doesn’t mean you have to refinance. The point here is whether or not you are satisfied with your current repayments. More importantly, is there a better option out there for you? Nobody wants to miss out on low mortgage rates, whether you have a conventional mortgage or an FHA mortgage. Nobody wants to get into more debt than they have to either. A refinancing deal should make your life easier and your payments lower. Misinformation might have led you to believe that a refinancing deal could save you a lot of money. That is not the case. You can also lose money with an unsatisfactory agreement. 

When you decide to take out a new loan to refinance your mortgage, you have to be 100-percent sure that it’s going to be worth it. After all, you’ll be replacing your loan with a new one. The process might not be very complicated, but a certain amount of effort is still required. You have to repay your first loan and create a new, more favorable one in its place. 

Are you aware of what you’re getting into with the new deal? Make sure you’re getting the best out of the situation. Only switch out for a better interest term and rate. Don’t settle for anything less. If your credit score allows, get a fixed interest rate, at a significantly lower level. Be careful what you take on, especially if your credit score is far from perfect. Only make the change if you’re going to save money.  

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Why You Might Want to Refinance Your Mortgage

To Secure a Low-Interest Rate

After a few years of paying an overly high-interest rate, you might be able to turn your situation around. You’ve only got to look at the ever-changing economy to appreciate how much mortgage rates have fallen since signing up for your mortgage. Now might be the right time to lock in a lower rate with the help of a refinancing company.

Another thing to consider is your personal credit history. It might have been far from ideal in the past, thereby restricting your chance of obtaining a lower interest rate loan. If you have a better job now, with a steady income and a better credit score, you could qualify for a lower rate. A lower interest rate could reduce your payments and make up for an increase in property prices, should you decide to relocate. 

To Repay Your Mortgage Faster

You can shorten the length of your loan with refinancing. If you want to reduce it to a shorter term, you’d ordinarily have to pay a larger monthly payment. Get a refinance mortgage with lower interest rates, and you get to repay your loan faster. The payments you make from your checking account might not be much higher. 

To Take Advantage of Your Home Equity 

Tapping into your home equity means you get to take advantage of the growing value of your home. Your home’s equity is the difference between the current value of your home and the balance of the loan you still owe. You can make use of that difference with mortgage refinancing. If you’ve been repaying your mortgage for years, chances are your home has grown in value. You can invest part of that increased value into other areas of your life that need funding. You might also be able to add to your savings. Most refinance lenders require you to keep at least 20 percent of your equity in the home to safeguard your financial wellbeing. 

Even so, you can still gain access to a significant amount of your home’s value with a cash-out refinance loan. It’s relatively simple and often tax-deductible. What it entails is taking out a bigger mortgage to pay the old loan back. You get the rest in cash. You can redirect those extra funds to home improvements, property investment, or to take care of debt. A home equity loan is also an option that allows you to take out a second mortgage while still keeping your first one. 

To Reduce Your Monthly Fees 

Some people want to reduce their regular payments to balance their budgets. It could potentially help them save thousands of dollars. To do that, you need to refinance for a lower interest rate mortgage program. Alternatively, you can lengthen your loan term. For example, opt-out of a 15-year repayment mortgage and switch to 30 years. The downside is that the longer the period, the more your interest piles up on top of the payments. 

To Switch Out an Adjustable-Rate Mortgage for a Fixed-Rate Mortgage 

Adjustable-rate loans are suitable if you want to take advantage of the initial lower rates. After the initial period, when the interest rate is low, you might find the repayments challenging. An adjustable-rate mortgage remains attractive, only as long as mortgage rates are low. If you’re not planning to stay in your current home longer than a couple of years, you might find an adjustable-rate mortgage useful. If you plan to live in your home for the foreseeable future, a new fixed-rate loan is a better option. This type of mortgage provides stability and security for the entire term. You’ll be able to choose between 10, 15, or 30-year fixed rates. During the duration of the mortgage, you’ll know exactly how much you have agreed to pay every month. Fluctuating interest costs won’t have any influence on your fixed mortgage rates

When You Want to Cancel Your Private Mortgage Insurance

The difference between conventional loans and Federal Housing Administration loans is in the insurance terms. With a traditional loan, it’s easy to cancel the insurance. With an FHA loan, you’re not allowed to cancel it. Instead, you either have to sell your home or refinance. If that’s your only option, you should look at the current value of your home and figure out when it’s the best time to refinance

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Different Types of Mortgage Refinance Loans

Rate-and-Term Refinance

Rate-and-term refinancing primarily occurs when interest rates drop. The process includes changing the rate and term of a mortgage while keeping the same loan balance. There are no new incoming financial assets for the refinance. The only thing that changes is the old interest rate, the loan term, or both. Taking advantage of a lower interest rate by refinancing is a great way to lower your payments. 

You could also redistribute the amount you need to pay over a shorter period. When mortgage rates are low, homeowners who have been making mortgage payments for years could get a better deal. They could refinance the remaining balance of their old mortgage and take out a new loan at a lower rate. Essentially, they’re starting again on better terms, and at the same time, adding extra years to make the repayments.

Shorter Loan Terms

An alternative is negotiating a shorter term for the loan. You could apply for refinancing with a new interest rate and reduce the repayment period. With a rate-and-term refinance, you’re taking advantage of a more favorable interest rate, which means you’re not significantly increasing your monthly payment. The improved interest rate compensates for the shortened term and higher fees. You’ll also be able to increase your savings over the life of the loan.

Adjustable Rates

Many borrowers consider rate-and-term refinancing when they are paying an adjustable-rate mortgage. This refinance option is not the best choice when it comes to long-term stability – an adjustable rate subjects you to ever-fluctuating payment costs. With a refinance, you can secure a fixed rate. Some mortgages have an initial fixed period, changing to an adjustable rate after some time. People with an adjustable-rate mortgage often opt-out for a rate-and-term refinance because it allows them to start again with a new fixed interest rate. The best time to make changes is when the fixed period of the initial mortgage is about to expire.

The switch between a fixed and an adjustable-rate mortgage can strongly affect your payments. It might also cause you to lose a lot of money suddenly. To prevent such a scenario, refinancing is an attractive option. Refinancing protects you from rising interests that are often a feature of an adjustable-rate mortgage. A rate-and-term refinance may be an option with your current mortgage lender. Even if a refinance deal is on the table, it doesn’t mean that you shouldn’t shop around for other refinance lenders’ offers. There is always a possibility that you’ll find different and more fitting terms for your loan purposes. 

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Cash-Out Refinance and When to Use It

Cash-out refinancing is possible for homeowners who have experienced a significant rise in their home’s value. When you refinance, you’re able to negotiate a better mortgage deal and release a cash amount. You could also change the terms of your mortgage plan. The primary purpose, however, is to free up financial resources for other purposes. Cash-out programs have higher refinance rates than rate-and-term deals, so they’re not for everyone. Depending on your credit score, debt-to-income ratio, and, of course, the equity of your home, you can qualify for different amounts of cash. 

Generally, you have to leave at least 20 percent of the equity. That means you can’t take out more than 80 percent of the loan-to-value ratio. An appraisal will help you understand exactly how much you can get, based on the specific value of your home. Cash-out refinancing deals usually include an interest rate of around 4%. Many people with more extended period fixed-rate mortgages wouldn’t want to lose out on their lower interest rate.

Instant Cash

If you are currently repaying at an affordable rate, consider whether you need to trade it in for instant cash. Closing costs and origination fees are other things about which you need to be particularly wary. Get yourself a financial advisor or ask your mortgage broker to assist you in calculating the actual cost. You don’t want to pay nearly half of the cash-out amount in closing costs.

Have a Purpose

An important factor with this type of refinancing is how you’re going to use the cash-out money. Many financial advisors say that spending your refinance money frivolously is the wrong decision. Instead, use the cash for a specific purpose. Momentary splurges are not going to be worth it. Invest in bettering your financial situation, like paying off old credit card debts and loans. Investing in higher education is another smart choice to make. If your child has to take out a private student loan to attend college, equity cash-out can replace that need. Mortgage rates on refinances are tax-deductible, so you could also use them for financing high-interest debts. At the same time, you could fund a much-needed home renovation, which will further add to the value of your home. 

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Best Mortgage Lenders for Refinancing

Refinancing an FHA Loan

You can always find a refinancing offer for your current situation, even when you have an FHA loan. You qualify as long as you’ve been repaying your mortgage diligently. Also, if you have been investing in your home, refinancing your FHA loan will allow you to access extra funds. The main concern is whether or not you are still residing in the property at the time of the refinancing. It has to be your first accommodation to get your refinance accepted. 

Conventional Loan vs. Streamline Refinancing

So, the question is: Do you want to switch to a conventional loan or go through the Streamline Refinancing route? Maybe you have started your homeownership with the help of the Federal Housing Administration loan, as many people do. It’s probably the easiest way to obtain a first-time mortgage, and many young people take that opportunity. An FHA loan doesn’t necessarily require incredibly high credit scores. Down payments start as low as 3% to 5%, and a federal organization secures your loan. All of this is great, but as your financial situation changes and the value of your home increases, priorities change.

Not to mention the rigid terms of mortgage insurance, which comes with an FHA-backed mortgage. Insurance is impossible to cancel and continues for the life of the loan. You are required to pay an upfront insurance premium, which is followed by regular monthly insurance payments. The insurance premiums add up to a significant amount of money over time. You could be paying an extra $100 to $500 every month, on top of your regular payment. That undermines the benefits of a lower interest rate loan. It gives you the false impression that you’re saving money. Instead, you’re just continually using extra funds for insurance. 

Refinance from an FHA Loan to a Conventional Loan

Refinancing with a conventional mortgage can save you money, even though it might have a higher interest rate. Also, some mortgage refinance lenders offer you options for cash-out refinancing with a conventional loan. When the value of your home has risen over the years, you no longer need to deal with unfavorable loan terms. It gives you the freedom to refinance with a new conventional mortgage type. At the same time, you’re able to eliminate insurance premiums. Such a situation occurs once your property reaches 78 percent loan-to-value ratio.

Even though the mortgage insurance gets canceled out then, it doesn’t mean the cancellation is easy to achieve. You’ll need to have an appraisal for your property and find out all the details about its current worth. Until it gets to the desired ratio, you might need to continue paying the costs of private insurance. Also, refinancing to a conventional mortgage includes closing costs, too. They typically range between 2% to 5% of the total loan cost. 

FHA Streamline Refinancing

The Federal Housing Administration also offers a Streamline Refinance program for anyone who already has an FHA loan. It’s relatively easy to navigate in comparison to the lengthy and strict refinancing process with a conventional mortgage. It offers excellent assistance for clients who want more affordable payments. The way to achieve this is by lowering the interest rate or converting it from adjustable to fixed. All of this, however, doesn’t mean an insurance premium isn’t going to be required anymore. You still need to pay premium monthly insurance fees, but the upfront insurance premium is refunded by the FHA.

Something else you don’t have to worry about is an unachievable loan-to-value ratio. Streamline refinancing allows borrowers with little or no equity to apply. If your mortgage balance exceeds the value of your property, the FHA Streamline Refinance program is a suitable choice. The best way to find out is by checking whether you have 20 percent equity in your home right now. If the answer is yes, then you can proceed with refinancing into a conventional loan. You might even be able to get a cash-out. With lower than 20 percent equity, the Streamline program would be a better choice. Income and appraisal documentation are not as stringent as with a conventional refinance. To qualify, however, you have to maintain a level of financial accountability, which means not being late with your mortgage payments. 

What You Need to Know Before Refinancing

When starting the process of a mortgage refinance, the first step is to look at your current financial profile. How has it changed in the years since you first took out your mortgage? Did you make some mistakes? After answering these questions, set yourself some goals and prioritize for the future. By doing so, you’ll be able to refine your choices of mortgage refinance lenders and mortgage types. With a defined set of reasons for refinancing and a clear vision for the future, you’ll make a better choice. 

Getting Your Documents in Order Is Essential

Before you apply to mortgage companies, make sure you have all the required documentation. It’ll save you lots of time and avoid a hassle. You have to present proper documentation to prove your eligibility and borrowing reliability. Here are the essential documents that everyone needs to have:

  • Credit report
  • Home appraisal 
  • Asset statements
  • Tax returns, W-2s, and 1099s

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Picking Out the Best Mortgage Lender for Refinancing

With such a wide variety of mortgage refinance options, you’re sure to be able to find a deal that satisfies your specific needs. Take into account how much it costs to refinance right now. With every different loan deal, calculate how much you’ll benefit. For example, is the current mortgage rate more favorable than the one you had previously? 

Rocket Mortgage

Rocket Mortgage gives the best performance of all online lenders. The application process is simple and doesn’t require any actual paperwork. It’s an excellent place to start for anyone who wants to look around and get acquainted with rates and offers. Refinancing your mortgage can be done from the comfort of your living room. Just start by entering your financial information into the Rocket Mortgage calculator, then explore and compare the options. In this way, you’ll get immediate refinance information based on the data you provided. You’ll be able to gauge how much you can save with a new loan and how you’ll make those savings. All you need to know is the value of your home and how much you want to borrow. Do you need additional funds, compared to your first loan, or maybe just new rate and term options?

Rocket Mortgage understands the hardships of not being able to afford your mortgage payments, and their customer support is ready to help. The mortgage application continues at a faster pace after your initial communication, and it’s incredibly easy to track its ongoing progress. When you settle and finally close the deal, make sure you use their online platform to manage your mortgage with no additional fees. Rocket Mortgage is not only a significant force in refinancing because of its online presence. It also provides some of the most desirable interest rates if you’re a first-time homebuyer, as well as for those who want to switch to different mortgage refinance companies. As a leading company, Rocket is desirable because of its wide selection of refinance options with low-interest rates. 

30-Year Fixed Mortgage

One of the company’s most popular mortgage offers is the 30-year fixed mortgage. It is also a good option if you’re looking to refinance with something long-term and more affordable. It allows you to refinance up to 97 percent of your home’s value. In such a case, insurance is going to be a likely requirement. It depends on how much of the property’s worth you decide to refinance and the down payment on which you agree. It is, however, a good money-saving option for anyone who wants to lower their monthly mortgage payment. You can get rates around 4.87% with as little as a 1.37% down payment. Of course, it all comes down to the client’s preferences and financial resources.

15-Year Fixed Mortgage

If you want a guaranteed stable rate but with a shorter loan period, you could refinance with a 15-year fixed-rate mortgage. You might think this would entail different monthly payments, but the rate is actually set at 4.25%. The down payment is 1%. None of the fixed-rate packages include taxes and insurance premiums, but these factors mostly depend on the borrower’s situation. 

When it comes to adjustable rates, the 5-year ARM mortgage is quite affordable. Its interest rate is the most attractive, compared to any other loans. For example, the current interest rate of the 5-year option comes in at 3.75%. Look carefully through the terms before deciding on this kind of mortgage. It might look manageable, but the mortgage rates are only that good for the first few years. You can still benefit from the low rates, as long as you don’t plan on staying in your current house for years to come. Either way, there’s always the option of refinancing when you’re no longer satisfied with the fluctuating costs. 

New American

With New American, you start the refinance process by using the refinance calculator on the website. Insert your current loan amount with its interest rate, term, and year of origination as well as your new requirements for a loan amount, rate, and duration. Once you find out the details about the available refinance loan deals, you then make an appointment with a mortgage broker. New American has 200 branches across the country and also offers other ways to communicate and apply for a loan. You can call them or send an email with any inquiries. It’s also possible to ask for a personal financial assessment. You can initiate the refinance process on their website and securely upload documents and provide an electronic signature.

New American has long been in the business of refinancing for government-insured FHA, VA, and USDA mortgages. Refinance cash-out operations for properties that are high in worth, and rate-and-term modifying refinances are also available. Borrowers have broad access to different loan amounts and categories without any minimal loan restrictions.

Fairway Independent 

Fairway Independent Mortgage is well known as one of the most prominent and longstanding refinance lenders on the market. They offer a great selection of mortgage types, including USDA loans and mortgage refinancing. Fairway allows you to apply for a loan online using their mobile app and close the deal in person. Overall, they receive positive customer feedback. One of their more attractive offers is the HomeStyle Renovation Loan. It’s a loan that combines two separate financing motivations: buying and renovating a home. This loan is suitable for clients looking to buy a property as well as for those wanting to refinance their current loan. 

Guild Mortgage

Guild Mortgage specializes in lending for residential home mortgages and works with every type of mortgage, from conventional to FHA and VA. Their services include refinancing for the needs of every dissatisfied mortgage owner. The calculator on their webpage guides you in how much you can potentially save off your payments with the Guild Mortgage offers. This lending company is right for you if you’re searching for a better interest rate than the one you have right now. If you need to update your plan to one with more suitable mortgage conditions, Guild Mortgage can help. If you’re interested in the specifics of what they have to offer, it’s easy to contact their loan officers. 

Best Mortgage Lenders for Refinancing

Final Tips Before You Apply for Mortgage Refinancing

Believe it or not, applying for a mortgage loan refinance is no more complicated than it is to initiate your first loan. If you’ve already reached this point of homeownership, you’ve gained some valuable experience. That doesn’t mean that you shouldn’t be careful with any new loan improvements. After a while, some things turn out not as hassle-free as you might have expected in the beginning. Determine your goals and priorities when it comes to your current situation and general livelihood. Straighten out your finances, and avoid getting debt and additional expenses, especially if you are someone with bad credit history. Always shop around and talk to as many possible refinance companies, banks, and credit unions before signing up for anything.

Do Your Research 

Compare and contrast not only the types of loans but the lending institutions themselves. Learn about their strengths and weaknesses regarding mortgage loans. Refinancing comes with a lot of responsibility to better your finances and budget more efficiently. You should find the most beneficial deal on the market for your case. There is undoubtedly one out there that will reduce your yearly expenses and let you allocate more funds for saving and spending on other things. Goal-oriented refinance deals are proven to be way more valuable for borrowers. The refinance lenders in your local area will be happy to assist and discuss your choices with you. 

Contact Your Original Lender

Before talking with different mortgage officers, make sure to visit or contact your original lender. Most likely, they will try to keep you as a client by offering ways in which you can change your current loan terms. If you receive a good offer from them, why not continue operating with a well-known company? If you’re not satisfied with a lender’s overall services and interest rates, there is no reason to continue under unfavorable loan terms. Start shopping around and use your original mortgage company’s offer as a point of reference. As long as you’re confident of your intentions to refinance, you will most definitely find what you’re looking for amongst the mortgage refinance companies. 

Over to You

What is your preferred way to research and apply for financial products? Do you typically use the various online calculators, or perhaps you prefer the old-fashioned, face-to-face consultation? Whether you’ve just refinanced or are about to do so, we’d love to hear about your experiences. Please take the time to leave us some comments in the provided section below. 

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