Are you a homeowner interested in saving money and reducing financial stress? At RoundPoint, we want to help you discover how a refinance can potentially lower your monthly payments, reduce your interest rates, and help you pay off your home faster. Keep reading to discover important refinancing details and how you could secure better mortgage terms through our refinancing options.
Refinance Basics
What is a refinance?
A refinance means you are replacing your existing mortgage loan with a new one. When you refinance your mortgage, you take out a new loan that pays off your existing mortgage loan. After that, you have a new mortgage which is repaid per the terms of your new mortgage loan agreement.
Refinancing your mortgage typically results in a more manageable monthly payment, strengthening your opportunities for financial success. Our Loan Officers are waiting to discuss your refinancing options and benefits with you!
What are the refinancing types?
When considering a refinance, it is important to understand there are a variety of types to suit different financial needs. Assessing your unique situation and goals can help you select the best refinance option for your financial future. Here’s an overview of the mortgage refinance types:
- Rate-and-term refinance: This type of refinance changes either the loan’s interest rate, term, or both. This may be a great option for homeowners that currently have an adjustable-rate mortgage (ARM) and would like to change it to a fixed-rate mortgage.
- Cash-out refinance: A cash-out refinance lets you tap into your home equity to withdraw cash. The withdrawn money may be used for a variety of purposes! Many people select this option to fund home renovations, debt consolidation, pay for college tuition, or make another significant purchase.
- Cash-in refinance: For a cash-in refinance, you make a lump sum payment to reduce your loan-to-value (LTV) ratio, resulting in lowered debt and potentially providing you with the opportunity to qualify for a lower interest rate.
- No-closing-cost refinance: This type of refinance allows you to roll the closing costs of the refinance into the loan. Although this generally means your monthly payment may be higher, there are typically less upfront expenses.
- Streamline refinance: A streamline refinance reduces some of the standard requirements (like income verification or an appraisal), often expediting the process. This option is only available to homeowners with existing government-insured loans.
Our Loan Officers understand this a big financial decision and would love to discuss which refinance option could work best for you.
At a Glance: Comparing Refinance Types
| Refinance Type | Primary Goal(s) | Ideal For |
| Rate-and-term refinance |
| Homeowners looking to lower their monthly payments, pay off their loan faster, or increase payment and financial stability. |
| Cash-out refinance |
| Homeowners seeking funds for large expenses like home improvements, college tuition, debt consolidation, etc. |
| Cash-in refinance |
| Homeowners interested in lowering the amount of debt they are carrying. |
| No-closing-cost refinance |
| Homeowners that would like to reduce their upfront expenses while taking advantage of a lower interest rate. Since the closing costs are added to your loan amount, this option is most suitable for homeowners that don’t plan to stay in their home long term. |
| Streamline refinance |
| Homeowners with existing government-backed loans looking for an efficient way to adjust their rate and/or term. |
Refinance Process
What are the steps of the refinance process?
At RoundPoint, we strive to make your refinance process simple and transparent. The refinance process is very similar to the process you experienced when you first purchased your home. Let’s review the general steps:
- The mortgage lender runs your credit to assess your credit score.
- You submit any required financial documentation (e.g., pay stubs, bank statements, etc.).
- A home appraisal is obtained to determine your home’s current value.
- The mortgage lender’s Underwriting team reviews all submitted documents in accordance with lending guidelines.
- Review and sign your final documents to close the loan!
Ready to get started? Call our Loan Officers or begin your application to see how a refinance can help you meet your financial goals.
Fees & Costs
What fees and costs are associated with refinancing?
Similar to a first mortgage, there are fees and costs involved with refinancing, commonly referred to as closing costs. It is important to understand these closing costs to ensure a refinance makes sense for your finances and is worthwhile in the long run.
Let’s look at a breakdown of common costs associated with refinancing:
- Application fee: This fee typically ranges from $75-$500 and is charged by the lender to process your loan application.
- Origination fee: Typically anywhere from 1%-1.5% of the loan amount, this fee is charged by lenders for processing your loan.
- Appraisal fee: Appraisal fees, often ranging from $0-$2000, cover the cost of a professional property appraisal.
- Credit report fee: This fee is paid to pull your credit report.
- Title fees: These fees, generally ranging from $700-$900, cover the costs of a title search and title insurance.
How can I lower my refinance costs and fees?
While many costs are considered standard, some are negotiable or can be avoided completely. Here are a few strategies that may reduce or eliminate your costs:
- Compare lenders: Fees are not the same for all mortgage lenders. Compare estimates from multiple lenders to determine the most competitive option.
- Negotiate: There is always an opportunity to negotiate closing costs with the lender, particularly if you have more than one competitive offer.
- Credit score: Improving your credit score may qualify you for lower interest rates or overall fees.
As a trusted lender, RoundPoint believes in transparency and helping you get the best deal!
Is a refinance right for me?
When should I consider refinancing?
There are a multitude of scenarios that may make refinancing an appealing and beneficial option:
- Lower interest rates: Interest rates have decreased since you took out your original loan.
- Improved credit: Your credit score has improved meaning you may qualify for better terms or a lower interest rate.
- Payment reduction: Refinancing to a longer term or lower interest rate may reduce your monthly payment amount, easing any financial strain you may be experiencing. Check out our Mortgage Calculator to see how different rates and loan terms could impact your payment.
- Change loan type: If your current mortgage has an adjustable interest rate, you may want to switch to a fixed-rate mortgage to avoid future rate fluctuations.
- Extra cash: Borrow against your home’s equity to access funds for major expenses.
If you think refinancing may be a smart move for you, let RoundPoint assist you in getting the most value out of your home.
When should I avoid refinancing?
Although refinancing is often beneficial, there are situations where it would not make sense to refinance your existing mortgage.
- Not staying in the home long term: If you anticipate selling your home in a few years, you may not be in the home long enough to recoup the closing costs paid to initiate the refinancing process.
- Costs outweigh the savings: Refinancing typically incurs costs similar to those paid during the original purchase of your home (e.g., application and appraisal fees). If a refinance results in minimal monthly savings, it will take longer for you to break even on the upfront fees.
- Consider your credit: If your credit score has decreased since originally purchasing your home, you may not qualify for a better rate.
- Already low interest rate: If you already have a competitive interest rate, refinancing may not result in considerable savings, particularly to justify the upfront costs.
- Busting your budget: If a new loan results in a higher monthly payment or longer loan term, consider the increased financial burden and whether you are in a position to tackle it. Refinancing should ease financial strain, not create or add to it!
Our Mortgage Calculator is an excellent resource to explore whether refinancing is the right choice for you. Still have questions? Our Loan Officers would be delighted to speak with you.
Using Your Home Equity: Comparing Your Options
| Refinance | Home Equity Loan | Home Equity Line of Credit (HELOC) | |
| What is it? | A new mortgage loan that replaces your existing mortgage loan | A fixed-term loan | A revolving line of credit |
| Funds | Lump sum check or reduced monthly payment due to change in term and/or rate | Lump sum check | Withdraw funds as needed |
| Interest Rates | Fixed or adjustable | Fixed | Adjustable |
| Upfront Costs | Closing costs similar to initial mortgage purchase | Typically lower closing costs than cash-out refinance | Often the lowest closing costs, sometimes none at all |
| Number of Payments | One consolidated monthly mortgage payment | Two payments: one for your primary mortgage and one for the home equity loan | Two payments: one for your primary mortgage and one for the HELOC |
| Ideal For | Homeowners interested in accessing a large lump sum amount, lowering your rate, and/or changing your term | Homeowners looking to fund a large expense but wanting to keep their original mortgage rate and terms | Homeowners needing to pay for ongoing or unexpected expenses that are also comfortable with varying rates and payment amounts |