Refinancing Options
Explore Whether Refinancing Fits Your Financial Goals
Sarah Bell Lane helps homeowners evaluate refinancing options — rate-and-term, cash-out, mortgage insurance removal, and more. Subject to qualification. May not benefit every borrower.
Refinancing may increase the total finance charges paid over the life of the loan. It is not appropriate for every borrower or every situation. Loan approval for a refinance is subject to credit qualification, income verification, asset documentation, property appraisal, underwriting review, and program eligibility. This information is provided for general educational purposes and does not constitute a loan offer or commitment to lend.
Types of Refinancing
Refinancing Options Worth Understanding
Rate-and-Term Refinance
Replaces your existing loan with a new loan that may have different terms, including a different interest rate or loan length. Whether this results in different payments or total cost depends on multiple factors specific to your loan and situation.
Cash-Out Refinance
A cash-out refinance pays off your existing mortgage and provides a new loan for a higher amount, with the difference paid to you. The amount available depends on your property value, existing balance, and lender program requirements.
Removing Mortgage Insurance
In some circumstances, refinancing may allow eligible borrowers to eliminate private mortgage insurance when the property value has increased and the new loan meets the required loan-to-value threshold. Eligibility depends on current conditions and lender guidelines.
Adjusting Loan Terms
Some borrowers refinance to change loan length — moving from a longer term to a shorter one, or the reverse. Shorter terms typically mean higher monthly payments but less total interest. Longer terms typically reduce monthly payments but increase total cost over the life of the loan.
Accessing Available Equity
If you have built equity in your property, a cash-out refinance may allow you to access a portion of that equity. The amount accessible depends on property value, existing loan balance, and applicable program requirements.
Investment Property Refinancing
Refinancing is possible for non-owner-occupied investment properties. Qualification requirements typically differ from primary residence financing, and program availability varies.
Think It Through
Questions to Consider Before Refinancing
Before moving forward with a refinance, these practical questions are worth working through with your financial picture in mind.
What is your current interest rate?
Comparing your existing rate to available options is one starting point. However, rate alone does not determine whether refinancing makes financial sense for your situation.
How long do you plan to keep the property?
Refinancing involves closing costs. The length of time you plan to keep the property relative to the break-even period is an important factor in evaluating whether refinancing may be worthwhile.
What are the estimated closing costs?
Closing costs are a real part of the refinancing equation. Your Loan Estimate will outline the anticipated costs associated with the new loan.
What is the estimated break-even period?
The break-even period is roughly how long it takes for any monthly savings to offset the cost of refinancing. This depends on the specific terms and your situation.
Will the new loan reset your repayment timeline?
Starting a new 30-year loan resets the amortization schedule. This means more of each early payment goes to interest, which affects total cost over the life of the loan.
What is the purpose of any equity you are accessing?
For cash-out refinances, clarity about the purpose of the funds is an important part of evaluating whether it is the right financial decision.
Cash-out refinancing increases your loan balance and the total interest paid over the life of the loan. Accessing equity through refinancing reduces your ownership stake in the property. Refinancing may increase the total finance charges paid over the life of the loan.
How a Refinance Generally Works
Review Your Situation
Gather your current loan information, recent property value estimates, and your goals.
Start the Application
Complete your application through the Preferred Funding, LLC secure portal.
Submit Documentation
Provide income, asset, identity, and property documents as requested.
Appraisal and Underwriting
The property is appraised and your complete application is reviewed by the underwriter.
Closing
Review and sign final loan documents to complete the transaction.
Timelines, steps, and documentation requirements vary by loan program, property type, and individual borrower situation. This overview is for general informational purposes only.
Refinancing Questions
There is no single answer that applies to every borrower. Refinancing may be worth exploring when you want to change your loan terms, access available equity for a specific purpose, or remove mortgage insurance when eligible. Whether it makes financial sense depends on your current loan, your goals, the associated costs, and how long you plan to keep the property. Refinancing may increase the total finance charges paid over the life of the loan.
Refinancing typically involves closing costs similar to those in a purchase transaction. Common costs include origination fees, appraisal fees, title insurance, and escrow fees. Costs vary depending on the loan program, lender, and property. Your Loan Estimate will provide a detailed breakdown. Some programs allow certain costs to be rolled into the loan balance, which increases the total amount owed and total interest paid.
Timelines vary depending on documentation readiness, property appraisal scheduling, underwriting volume, and other factors specific to your transaction. Being prepared with complete documentation before beginning typically helps the process move more efficiently.
Refinancing when a second mortgage or home equity line of credit (HELOC) is in place involves additional considerations. The second lien holder may be required to agree to remain in a subordinate position. This situation involves specific requirements worth discussing in detail.
Applying for a refinance involves a credit inquiry, which may have a minor temporary effect on your credit score. Mortgage rate shopping within a relatively short window of time is typically treated as a single inquiry by credit scoring models, which can reduce the overall impact.
Want to Explore Your Refinancing Options?
Start by discussing your current loan situation and goals with Sarah. There is no obligation in understanding your options.