Refinancing replaces your current mortgage with a new one. People do it to change the rate or the term, to take cash out of their home equity, or to remove a co-borrower or mortgage insurance. It can help, but it has costs, so the decision starts with the numbers, not the headlines. Here is the process in seven steps.
1. Know why you want to refinance
Write down the goal before you talk to any lender:
- Lower payment or rate: a rate-and-term refinance changes the rate, the term, or both.
- Shorter term: moving from 30 to 15 years usually raises the payment but lowers the total interest.
- Cash out: a cash-out refinance gives you a larger loan and pays you the difference, using your equity.
- Remove mortgage insurance or a co-borrower: sometimes possible once you have enough equity.
Each goal leads to a different loan, so a clear goal saves time.
2. Check your current numbers
Find your current balance, rate, monthly payment and how many years are left. Pull your credit reports at AnnualCreditReport.com and fix any errors. Estimate your home value, knowing that the lender will usually order its own appraisal.
3. Learn which refinance types fit your loan
- Conventional refinance: follows Fannie Mae and Freddie Mac rules.
- FHA Streamline: for existing FHA loans, with reduced documentation.
- VA IRRRL: for existing VA loans, to lower the rate.
- Non-QM refinance: for borrowers whose income or documents do not fit the standard rules, such as self-employed borrowers using bank statements, investors using DSCR, or ITIN borrowers.
How much you can borrow depends on the loan type, the property and how much equity you have. Your loan officer confirms it for your case.
4. Compare Loan Estimates, not only rates
After you apply, each lender must give you a Loan Estimate within three business days. Compare them line by line: rate, APR, points, lender fees, third-party fees and cash to close. Then calculate your break-even point: total closing costs divided by your monthly savings tells you how many months it takes to recover the cost. If you plan to sell before then, the refinance may not pay off. The CFPB has a guide to the Loan Estimate.
A mortgage broker such as Heart Mortgage can request options from more than one lender for the same scenario, which makes this comparison easier.
5. Prepare your documents
Lenders usually ask for:
- Photo ID.
- Recent pay stubs and W-2s, or tax returns if you are self-employed.
- Bank statements.
- Your current mortgage statement.
- Your homeowners insurance policy and, if you have one, HOA information.
Make sure your property taxes and HOA dues are current. A title search will check for liens on the property.
6. Go through underwriting and appraisal
The underwriter reviews your income, credit, assets and the appraisal. If they ask for more documents, send them quickly. Ask your loan officer about the rate lock: how long it lasts and what happens if closing is delayed.
7. Review the Closing Disclosure and close
You receive the Closing Disclosure at least three business days before closing. Compare it with your Loan Estimate and ask about any change. In many refinances of a primary home, federal law also gives you three business days after closing to cancel the loan. The CFPB explains this right of rescission.
Frequently asked questions
What is a mortgage refinance?
It is a new loan that pays off your current mortgage. The new loan can have a different rate, term or balance.
When does refinancing make sense?
When the savings or the cash you receive are worth more than the closing costs over the time you plan to keep the home. The break-even calculation in step 4 helps answer that.
How much does it cost to refinance?
It depends on the loan amount, the lender and the state. Costs usually include lender fees, appraisal, title and recording fees. Your Loan Estimate lists all of them.
Can I refinance if I am self-employed or have an ITIN?
Often yes, through Non-QM programs that use bank statements or other documentation. Requirements vary by lender.
Where can I compare refinance offers?
Ask more than one lender or broker for a Loan Estimate on the same day, for the same loan amount and term, and compare the APR and total costs.
Requirements and terms vary by borrower profile, program and lender, and are subject to change. This article is educational and is not a commitment to lend. Heart Mortgage Corporation, NMLS #2045769. Equal Housing Opportunity.
