Refinancing

A refinance replaces your current mortgage with a new one. People usually choose to refinance in order to lower their payment, change the length of their loan, or take cash out of their home. The basics are below. Our refinance guide goes into more detail on break-even, no-cost refinances, points, rate locks and your right to cancel.

Common reasons to refinance

• Lower your monthly payment.
• Switch from an adjustable rate to a fixed rate before your rate changes.
• Get rid of mortgage insurance, for example by moving from an FHA loan to a conventional loan once you have enough equity.
• Pay off your home sooner with a shorter term. Your payment goes up, but you pay less interest overall.
• Take cash out for home improvements or to pay off higher-interest debt.
• Take an ex-spouse off the loan after a divorce. A quitclaim deed takes them off the title, but it doesn’t take them off the mortgage.

Learn more about how adjustable rates change and when mortgage insurance comes off.

Will it pay off?

Refinancing comes with closing costs, so you need to know how long it will take to make that money back. Divide your total costs by how much you’ll save each month. That gives you your break-even point in months. If you plan to sell or refinance again before then, it probably won’t pay off.

Try it with your own numbers in our refinance calculator. It runs in your browser, so nothing you enter gets sent to us.

You may have heard that you should wait until rates drop two points below yours. That was never a real rule. Our guide explains where the two-point rule came from.

Cash-out refinance or HELOC?

There are two main ways to borrow against your home’s equity. A cash-out refinance replaces your mortgage with a bigger one and you get the difference in cash. Your whole balance moves to the new rate. A home equity line of credit (HELOC) is a separate loan on top of your mortgage, so the rate on your mortgage stays the same. If you have a lower rate now, that can make a big difference.

Which one costs less depends on your current rate, how much you need and how long you’ll take to pay it back. Read more about how a HELOC works.

What you’ll need

A refinance needs most of the same documents as a purchase: proof of income, bank statements, a photo ID, and your current mortgage statement. The application checklist has the full list. Some streamlined refinances, like FHA and VA streamlines, need a lot less. Your loan officer can tell you if you qualify.

How long it takes

A refinance goes through the same steps as a purchase. It’s often quicker, since there’s no seller and no contract deadline. See what happens at each step.

Have questions?

Our FAQ covers points, APR, rate locks and closing. Or find a loan officer licensed in your state and ask them directly.