Tools & Resources
Refinance Frequently Asked Questions
The Refinancing Process
What is refinancing and what are some reasons people choose to refinance?
Refinancing is the process of paying off one mortgage loan with the money from a new loan, using the same property as security. The decision to refinance will depend upon your personal objectives – but here are some of the most common reasons you might choose to do so:
- To reduce monthly mortgage payments: When a lower interest rate on your loan is available – typically 1% or more – refinancing can help you save money every month.
- To cash out a portion of the equity in your home: You can get extra cash by obtaining a new loan for a balance larger than the one on your existing loan. You can then use the cash for anything from home improvements to college tuition.
- To obtain a stable interest rate: You may be able to switch from the uncertainty of a variable interest rate to a more stable (and possibly even lower) fixed rate.
- To consolidate debt: Similar to a cash out refinance, debt consolidation allows you to take out a new loan for a larger balance than your existing mortgage. You can then use the cash difference to pay off any higher interest debts you may have. Essentially you are using your home as collateral for the consolidated debts.
- To pay off your mortgage sooner: You can switch to a shorter repayment term, which can help you save thousands of dollars in interest payments.
To help decide if it makes good sense to refinance, start by speaking with an experienced loan consultant, call (800) 210-8849.
How does a cash out refinance work?
Unless you currently have an interest-only mortgage, as you continue to make monthly payments on your mortgage, you’re building equity in your home. You can cash out by taking out a new, larger mortgage against that equity. Many people use the money obtained from a cash-out for, among other things, home improvements, college tuition, major life events or to pay off credit card debt.
How much of my home's equity can I use to refinance?
The amount of equity available to you is based on subtracting what you currently owe from the value of your home. In some cases, you can use up to 90% of the appraised value of your home to consolidate debt or make major purchases.
We’ll be glad to help you determine how much of your home equity you can use to refinance.
Can I still refinance even if I don't have much equity?
In some cases, yes. The amount you can refinance depends upon your loan program. With some loan programs, you can refinance up to 90% of the appraised value of your home. We'll help you discover a refinance or alternative loan program that will work for you. Simply contact an experienced loan consultant at (800) 210-8849.
How much does a refinance closing cost?
Closing costs for refinancing vary from state to state. Typically, closing costs are 1% to 2% of the total loan amount. You also have the option to pay points to achieve a lower rate – or, in some cases, you can accept a higher rate in exchange for the lender paying a portion of your total closing costs.
What are the steps involved in a refinance closing?
A refinance closing is similar to your original closing on the property. After your loan is approved, your loan consultant will provide you with the list of documents you'll need to bring to the closing, and you'll receive an estimate that outlines approximate closing costs. Bring a cashier's check with you to the closing that covers the estimated amount. You will also be required to outline how the refinance funds will be used.
If you are refinancing your primary residence, the loan proceeds won't be issued until three business days after you sign the loan documents. This is known as the borrower's right of rescission period. The rescission period is not required on second homes and investment properties.
Am I required to bring certified funds to closing?
Yes. Bring either certified funds or a cashier's check made payable to yourself, which you can endorse and hand over to the attorney or closing agent. If the amount is higher than what is needed, the excess will be refunded. Bring a blank personal check just in case any additional smaller funds are required. You may also wire funds into the closing agent's account. To obtain wiring instructions or for more information, contact the closing agent in advance or an experienced loan consultant anytime at (800) 210-8849.
How do I know the final dollar amount I will need for closing?
The closing agent or attorney will provide the final figure prior to closing. You can also ask your loan consultant for an estimate at any time.
What if I'm not able to attend the closing?
You have a few choices. First, you can sign a Power of Attorney (POA). A POA is a legal, notarized document that allows someone else to sign and act on an absent person's behalf. A POA must specifically state that the document is to be used to finance the purchase or refinance of real estate, and it must indicate the property address (for VA loans, it must also be specific to the use of your VA Entitlement). The closing agent or attorney will coordinate and obtain the POA in advance of the closing date, as it will have to be recorded along with the other mortgage documents.
The second option, though not available in all jurisdictions, is to do a mail-away closing. In this case, the closing agent will mail the closing documents to you. You would then sign all the necessary documents and mail them back. The closing agent will release the funds and record the transaction at the county office before mailing the package back to the lender. Check with your loan consultant at (800) 210-8849 to learn if a mail-away closing is available for you.
What is the rescission period?
The rescission period, also known as a “right to cancel” period, allows you to reconsider – and even cancel – a refinancing loan secured by your primary residence. The length of the rescission period is three business days after you have signed the loan documents. As required by federal law, the loan proceeds will not be disbursed until the rescission period has ended.