Refinance Learning Center

Welcome to our Refinance Learning Center—your go-to resource for understanding how refinancing can lower your monthly payment, shorten your loan term, or access your home’s equity. Explore expert tips, tools, and guides designed to help you make confident, informed decisions about your refinance options.

Refinance Learning Center Menu

Required Documentation

Common Refinance Goals

Lower Your Payment

If your current rate is higher than the market interest rates, it may be time to consider a refinance.

If your goal is to lower your monthly mortgage payment, refinancing provides you with the opportunity to lower your interest rate and to reset your payments based on a new term. You can choose any term you like, even going back to a 30 year term if cash flow is a top priority.

If you don't want to reset back to 30 years, then look at matching the new loan term to the current amount of years left on your loan. You can even get as exact as the total number of years and months left. So if you have had a 30 year loan for 2.5 years, you could refinance with a 27.5 year term on your new loan.

Typically, you will want to reduce your interest rate by at least 1% to justify the time and cost of a refinance. In some cases, it might make sense to refinance with a smaller reduction in rate if the costs are minimal. See below for strategies to reduce refinancing costs.

Shorten Your Term

If rates are low enough, it may be time to shorten your loan term to 15 or even 10 years.

Depending on your current rate and loan balance, reducing your term to a 15 or 10 year term may increase your monthly payment but could save you tens of thousands in overall interest over the life of the loan.

Switching to a shorter term can be a financial commitment so you will want to make sure you are comfortable with the potentially higher payment. If a 15 year mortgage payment stresses your monthly budget, a 20 year term may be right for you. Most people generally think about 30 or 15 year terms when it comes to fixed rate mortgages, but a 20 year can be good alternative.

Another alternative to a 15 or 10 year term is to commit to making additional principal payments on your own. You can always shorten your term by paying extra. So if it makes sense to refinance rate-wise, but committing to a higher payment is worrisome, go ahead and refinance to the lower rate, stay on a term that is comfortable, but make a plan to pay extra on a regular basis to pay off your loan faster.

Get Cash Out of Your Home

If you need cash and rates are lower or close to your current mortgage rate, refinancing the entire current balance plus the amount of cash you need might be the best option. This is called a cash-out refinance. You can lower the rate on your current balance plus borrow the additional funds on a fixed rate mortgage.

You can use these funds for any purpose: home renovations, college tuition, starting or investing in a new business, or any other reason you need the funds.

You will be reducing your equity in the home, meaning you will have a higher total balance to pay off, but you will have the funds that you need. You should weigh this tradeoff when considering a cash-out refinance.

Should I Refinance My Home?

There are several factors to consider when thinking about whether or not you should refinance your home.

First, determine how long you expect to live in your home. If you refinance your mortgage loan, you will be required to pay closing costs, which can cost you several thousand dollars. If you do not plan to stay in the home long enough to reach your breakeven point, you will not see the savings benefit of a refinance.

Calculating a breakeven point is a simple formula - divide the hard cost of a refinance by the monthly savings. For example, if it cost you $3,000 to refinance into a new loan that saves you $150/month, then you will recoup your cost in 20 months. If you plan to keep the home (more specifically, the loan) for more than 20 months, you will save money. But if you plan to sell or payoff the loan within 20 months, you would lose money by refinancing.

To get into a little further detail, only include the hard cost of the refinance. Make sure to exclude prepaid or escrow items for real estate taxes and homeowners insurance since those are expenses related to your ownership, not refinance costs.

Also, if you are increasing or decreasing the number of months left on your current loan, make sure to focus on the interest savings more than the actual payment savings. Payment savings may be a priority for you, which is fine, but your real savings comes with the interest portion of the loan. You can compare the current interest portion of your payment to the interest portion of the new payment. Since the interest portion decreases each month, you may want to compare these numbers over a period of time that makes sense to you, either the entire loan term if you plan to keep the loan/home long term or a shorter period if you have plans to payoff or sell before loan maturity.

Refinance Closing Costs

You need to factor closing costs anytime you consider refinancing. While the appeal of a lower rate and/or payment, you will want to make sure the costs justify the savings and fit into your overall financial and life plan.

To help determine or justify a refinance, you always need to consider the breakeven point of refinancing. This is a simple formula - divide the hard cost of refinancing by the monthly savings. For example, if it cost you $3,000 to refinance into a new loan that saves you $150/month, then you will recoup your cost in 20 months. If you plan to keep the home (and loan more specifically) for more than 20 months, you will save money. But if you plan to sell or payoff the loan within 20 months, you would lose money by refinancing.

To get into a little further detail, only include the hard cost of the refinance. Make sure to exclude prepaid or escrow items for real estate taxes and homeowners insurance since those are expenses related to your ownership, not refinance costs.

Also, if you are increasing or decreasing your the number of months left on your current loan, make sure to focus on the interest savings more than the actual payment savings. Payment savings may be a priority for you, which is fine, but your real savings comes with the interest portion of the loan. You can compare the current interest portion of your payment to the interest portion of the new payment. Since the interest portion decreases each month, you may want to compare these numbers over a period of time that makes sense to you, either the entire loan term if you plan to keep the loan/home long term or a shorter period if you have plans to payoff or sell before loan maturity.

No Closing Cost Refinance

One great refinance strategy is to look at a no closing cost refinance.

If lower rates are available but you are unsure how long you may keep the loan or your home, a no closing cost refinance can be a great solution. Instead of paying closing costs or rolling them into your new loan balance, you can opt for a slightly higher interest rate and receive a lender credit that is applied to your closing costs.

For example, if you are able to refinance to 5.0% for $3,500 in closing costs, you may be able to refinance to 5.25% and receive a $3,500 lender credit to cover those closing costs. This works because a lender originating a loan at 5.25% when rates are 5.0% will be able to sell the higher rate loan for more money. They can simply give that additional revenue back to you in the form of a lender credit at closing.

If you opt for a no closing cost refinance, you will be taking a slightly higher rate than what might be available, but your breakeven point goes to 0, giving you net savings from month one.

Refinance Process

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A good place to start when considering a refinance is to connect with a mortgage lender. Your lender will ask questions to understand your refinance goals and help you determine if refinancing makes sense for you. Our consultation consists of a simple 10 minute phone or text conversation. During this time, we will want to understand the following details:

-Current Interest Rate Environment
-Your current interest rate
-Your long term plans for the home and other financial goals

After your consultation, we will provide you with a quote to review. If the numbers look good, we can proceed with an application.
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Your appraisal will also be ordered while your loan is being processed. A licensed appraiser will visit the property and establish a value for your home. The appraiser will examine both the interior and exterior of the house, narrowing in on the condition, size, quality of construction and amenities. The appraiser will compare the home to similar, nearby sold properties to determine the value of the home.

The appraisal insures the property serves as adequate collateral for your loan, as well as to provide you with an independent opinion of its value.
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Once all conditions for your loan have be cleared by underwriting, we will issue your final approval and prepare your closing documents.

At least three days prior to your closing date, we will provide you with the Closing Disclosure. This document will detail your loan terms, final amounts for payments and closing costs, and provide an exact cash to close figure. We pride ourselves on making sure there are no surprises with the Closing Disclosure.
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Documentation Needed to Refinance My Mortgage

When you apply for a refinance, there will be certain documentation that you will need to provide your lender.

Once you apply, your lender will obtain a credit report for you. This will show the lender all your monthly debt obligations that will factor into your debt-to-income ratio. An appraisal will be ordered by your lender if one is needed.

In addition, you will need to provide the following documents:

2 most recent paystubs
All W-2 forms for the last two years or tax returns, if self-employed
2 most recent bank statements, if you are bringing money to closing
Copy of your ID
Proof of insurance

These are standard documents that will need to be provided no matter who your lender is. You likely provided most of these documents when you purchased the home.