Refinancing your home: what is it and who can benefit?

3 mins read


Your home is one of your biggest investments. Home refinancing is a common practice for many homeowners who want to leverage that investment to improve their overall financial situation by trading in their current mortgage for one with more favorable terms.

If you’re considering refinancing, let’s look at how it works, some of the benefits and drawbacks, and see if it’s right for you.

Home refinancing 101

When you refinance a mortgage, you replace your existing home loan with a brand-new one. In most cases, the new mortgage has a more favorable interest rate and a new principal amount. The newer mortgage pays off the previous mortgage, and you pay it back monthly over the life of the loan.

What are the benefits of refinancing?

Some of the many benefits of trading in your old mortgage loan for a new one includes:

  • Reducing your monthly payment
  • Lowering your interest rate
  • Eliminating private mortgage insurance (PMI)
  • Changing the type of rate
  • Shortening the length of your mortgage loan
  • Gaining access to cash for the equity in your home
  • Eliminating a co-borrower

For a quick comparison of your current loan with a potential refinanced loan, you can run the numbers through this free online calculator to see if it makes financial sense for you to pursue it.

When you refinance a mortgage, you replace your existing home loan with a brand-new one. In most cases, the new mortgage has a more favorable interest rate and a new principal amount.


Considering the cost

Though there are many reasons that refinancing may work to your advantage, there are a few drawbacks to consider as well:

The clock starts over

Since you are replacing your existing mortgage with a new mortgage, the clock rolls back to day one on your mortgage term. So, if you are replacing a 30-year mortgage that you’ve paid on for 5 years and you have 25 years left on the loan, you’ll reset the clock to 30 years.

It costs to close

Lender fees and taxes generally range between 3% to 6% of the loan’s principal. Add to that an appraisal and title search and your costs can reach into the thousands. Many people roll these fees into the new mortgage, but in some cases you may be required to bring cash to closing. Consider how long you plan to stay in your home and how many months it will take for your new savings to exceed the refinancing costs.

How to refinance

To qualify to refinance your mortgage, a lender looks at your income, credit score, debt-to-income ratio, and the amount of equity you have in your home. The refinancing process is very similar to the original process you went through when you got your mortgage. Our team is here to help you understand all of the requirements and to walk you through each step in the refi process, which includes:

  • Pulling your credit
  • Comparing rates and fees
  • Choosing a lender and applying for a loan
  • Locking in your interest rate
  • Submitting your financial documents
  • Appraising and underwriting

Soon, you’ll be on the last step in the process, which is closing on your new loan. In general, it takes between 30 and 45 days to refinance your mortgage from start to finish. You can help hasten the process by having all your paperwork in order and responding quickly to questions and follow-ups from our team.

Ready to move forward?

Keller Mortgage simplifies the process and makes it easy for you. Our lending experts walk with you step-by-step through the process and are always available to answer your questions. To find out if refinancing will save you money and accelerate your financial goals, call Keller Mortgage to discuss your options and discover if a refinance is right for you.

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