Why Refinance Your Mortgage
There are multiple reasons to refinance your mortgage. People usually refinance to save money, either in the short run or the long run, and sometimes to borrow against their equity. Here are some of the main reasons to refinance:
To get a lower mortgage rate. If mortgage interest rates fall after you get the loan, you may be able to refinance to a lower rate. This can result in smaller monthly payments.
To shorten the term. Refinancing from a 30-year mortgage to a shorter-term loan might increase your monthly payment , but it decreases the overall interest you pay over the life of the loan.
To get rid of mortgage insurance. When you buy a home with a down payment of less than 20%, you have to pay for mortgage insurance. Refinancing is one way to stop paying private mortgage insurance, and it’s the only way to get rid of FHA mortgage insurance.
To replace an adjustable-rate mortgage, or ARM, with a fixed-rate loan. Rather than enduring the uncertainty of annual interest-rate adjustments with an ARM, you might refinance to a fixed-rate loan so you don’t have to worry that the rate will rise.
To get your hands on equity. With a cash-out refinance, you borrow more than your current loan balance and take out the difference in cash. A cash-out refinance is a popular way to pay for home improvements.
» MORE:Compare today’s refinance rates
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What To Look For In A Mortgage Refinance Company
When deciding on which mortgage refinance company to work with, there are a few things you need to consider. First, you need to decide whether or not you want to work with a local company. If you are in the market for a mortgage refinance company, it is a good idea to find one that is local. This will make the process much easier for you, as you will be able to visit the office often and ask questions and get to know the employees. Next, you need to consider the mortgage refinance companys reputation. Because of the many scams and fraudulent mortgage refinance companies, it is a good idea to find out more about the company before you start working with them. You should also read reviews online and ask your friends and family for recommendations. Lastly, you should consider the companys fees. The process is often complicated and you will want to be sure that you are not being charged an arm and a leg by the company.
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How Much Does It Cost To Refinance A Mortgage
Refinancing closing costs can run anywhere from 2% to 5% of the loan amount. There are no-closing-cost refinance options, but they generally involve rolling closing costs into the principal balance, which will likely cost more in the long run. The bottom line is that refinancing can be very financially advantageousbut its rarely free.
Best Overall: Rocket Mortgage
- Refinance into several types of mortgages
- Top lender for customer satisfaction from J.D. Power for 11 straight years, and No. 2 in 2021
- Fast, easy online experience
- Can’t refinance into a USDA mortgage
- Doesn’t accept alternative credit data
- Available in all 50 US states and Washington, DC
- Doesn’t accept alternative data, like proof of paying bills on time, in addition to a credit score
- Minimum credit score displayed is for conforming mortgages
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How Much Does It Cost To Refinance
Refinancing does come with closing costs. According to 2020 averages, the typical homeowner pays just under $3,400 total to refinance their mortgage, though it varies by state.
Some lenders offer what are called no-closing-cost mortgages. These allow you to finance your closing costs or roll them into your loan balance and pay them off over time.
Wells Fargo: Best For In
If an online mortgage solution isnt right for you, consider refinancing with Wells Fargo. Wells Fargo is one of the largest mortgage lenders in the United States, with over 8,000 independent branches in operation.
At Wells Fargo, you can apply for a mortgage loan online, over the phone or in-person at one of its branches. You can also begin your mortgage loan online and finish out your application in person with a representative. If the comfort of a human helping hand is on top of your list of refinancing priorities, be sure to consider a refinance with Wells Fargo.
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Tips To Get The Lowest Mortgage Rate
If you want the lowest mortgage rate available, you have to shop around. Thats the number one rule.
But there are other strategies you can use to get lower offers from the lenders you talk to.
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How To Find The Lowest Rates
The only way to find the best rate when you refinance is to shop around with different lenders.
And dont just look at interest rates when you comparison shop. Also pay attention to:
- Discount points Does the quote include an extra fee up front in order to lower your rate?
- Mortgage origination fees These upfront charges vary a lot from lender to lender
- Annual Percentage Rate This rate includes your interest and loan fees, so its a good way to compare the total cost of two loans
- Monthly payment Compare total monthly mortgage payments, including loan principal and interest as well as property taxes and homeowners insurance
Its also worth checking rates from more than one type of mortgage lender.
Try getting a quote from a big bank, online lender, and credit union maybe even a mortgage broker. Each will be able to offer you a different rate and fee package depending on your unique circumstances.
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Choosing A Refinance Lender
Whether youre looking for the reach of a traditional bank or the personalized service of a credit union, always shop multiple lenders and compare the interest rate and terms each lender offers. Even though it might be easy to refinance with your current mortgage lender, it may not offer the best deal.
Everything can be negotiated. Your lender is required to provide you with a Loan Estimate after you apply. Compare fees listed under the “origination charges” on the document. If you are not comfortable with a fee, negotiate for it to be removed or reduced.
What is the real cost of your mortgage? Look at the annual percentage rate, or APR. This number covers all the costs of the mortgage including the interest rate and fees.
Luxury Mortgage: Best For Self
Luxury Mortgage makes it easy for all types of home buyers to get approved for a mortgage. Their flexible requirements can help you get financing, with no employment or income verification and no minimum DTI. Luxury Mortgage offers traditional loan terms, as well as more flexible home payment plans with their 40-year loan program.
Its also easier to get approved if youre self-employed. Tax returns are not required and youll only need one year of self-employment income history and a minimum credit score of 580. Luxury Mortgage can also help you get approved on assets alone, like your bank statements, stocks and bonds, or retirement accounts.
Luxury Mortgage is licensed to lend in Connecticut, Georgia, Illinois, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington.
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Best For A Simple Application Process: Nbkc Bank
- Refinance into a variety of mortgage types
- Easily view customized rates
- Mortgages available in all 50 US states and Washington, DC
- Can’t refinance into a USDA mortgage
- Doesn’t accept non-traditional credit
- Provides mortgages in all 50 US states and Washington, DC
- Branches in Kansas City, Missouri
- $750 in lender fees, including the application, origination, underwriting, and processing fees
- Minimum credit score displayed is for conventional refinancing
What Factors Should Someone Take Into Consideration When Choosing A Mortgage Refinance Lender
Anthony Park, author:
“I feel like with a refinance, you’re going based on numbers a lot more than on your original mortgage. Probably because the mortgage feels like more of a weighty transaction, whereas with refinancing, you’re kind of an old hand at it at this point. I think the numbers matter a lot more for a refinance.”
Laura Grace Tarpley, Personal Finance Insider:
“Compare lenders’ interest rates and fees. Lenders charge different amounts for each type of fee, and not all even charge the same fees. For example, not every lender charges an origination fee. So closing costs could affect your decision as much as the interest rate does.”
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Are These Mortgage Refinance Lenders Trustworthy
The Better Business Bureau grades companies from F to A+. Grades are based on responses to customer complaints, honesty in advertising, and transparency about business practices. Here are the BBB grades for our top mortgage refinance companies:
| Lender | |
| Northpointe Bank | A+ |
Almost all of our top picks have an A+ from the BBB. The exceptions are Guild Mortgage, Chase, and Navy Federal. The BBB says that it gave Guild Mortgage and Chase an A- rating rating due to government actions taken against the businesses. Meanwhile, Navy Federal has an NR because it is responding to customer complaints.
Several of these lenders do have recent public controversies, though, even the ones with great BBB grades.
The US Justice Department required Rocket Mortgage’s parent company Quicken Loans to pay $32.5 million for alleged mortgage fraud in 2019. The Justice Department claimed Quicken Loans approved mortgage applications it shouldn’t have. The company never admitted to mortgage fraud, although it did pay the settlement.
A Navy Federal employee has claimed the lender pressured mortgage underwriters to approve loans even if they didn’t have sufficient reason to believe applicants could repay the loans. Then she filed a lawsuit and said Navy Federal retaliated against her whistleblowing by changing her job duties. She dropped the case in late 2020.
If any of these recent issues worry you, you may decide to go with one of the other refinance lenders on our list.
How Much Can I Borrow For A Mortgage
The amount of money you can borrow is affected by the property, type of loan, and your personal financial situation.
During the mortgage preapproval process the lender will look at your overall financial profile to determine how much it is willing to let you borrow. A big factor in this process is your debt-to-income ratio . Your DTI is calculated by dividing your total monthly debt payments by your monthly income. In most cases, the maximum DTI a lender will allow is 43%. So if you make $5,000 a month your mortgage payment and other monthly debt payments cant exceed $2,150.
To protect its investment, a lender will typically only let you borrow a certain percentage of a propertys value. So the value of the property can also limit how much you can borrow. Most mortgage loans require a down payment of anywhere from 3% to 20%. You may be able to borrow 100% of the propertys value with certain government-backed loans, like Department of Veterans Affairs Loans or U.S. Department of Agriculture Rural Development loans.
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Best For No Lender Fees: Network Capital Funding
- Accepts non-traditional credit
- Will work with you to help you improve your credit score if you dont qualify
- Offers mortgages for self-employed borrowers and real estate investors
- Not available in Connecticut, Georgia, Massachusetts, Missouri, Nevada, New Hampshire, or Utah
- Cant view customized rates online
- Doesnt charge lender fees
Navy Federal Credit Union
The bottom line:Navy Federal is a good option for people affiliated with the military overall, but especially if you’re searching for a lender that’s friendly to people who aren’t in the best financial situation namely, people with low credit scores.
Navy Federal earned a high score in J.D. Power’s 2021 customer satisfaction study. However, because it doesn’t meet certain criteria, it didn’t receive a ranking. You can apply using alternative credit data with this lender.
You can only become a member of Navy Federal Credit Union if you or your family is affiliated with the military, you are a Department of Defense civilian personnel or contractor, or you live with a Navy Federal member. The BBB gives Navy Federal an NR rating because the business is currently responding to previously closed complaints.
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*lendingtree Mortgage Lender Rating System
LendingTrees mortgage lender rating is based on a 10-point scale that factors in several features, including digital application and closing processes, available loan products and online and in-person accessibility. LendingTrees editorial team calculates each rating based on a review of information available on the lenders website. In some cases, additional information is provided by a lender representative.
The Best Refinance Rates Ranked
To find the lenders with the best refinance rates, we looked at loan-level data filed in 2021 under the Home Mortgage Disclosure Act .
Keep in mind that mortgage interest rates hit record lows in 2020 and 2021. Todays mortgage refinance rates have risen and industry experts predict theyll stay elevated throughout 2022. That means the rates youre quoted today are likely to be significantly higher than what you see below.
Still, these average rates provide a helpful way to compare lenders side by side so you know where to start looking.
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Top Mortgage Refinance Companies
When you refinance student loans or auto loans, you may not pay any fees.
But, when you refinance a mortgage, expect to pay closing costs between 3% and 6% of your loan amount. These fees include the home appraiser and title change fees.
Comparing refinance rates from several lenders can help you find the best rates and affordable closing costs.
Raise Your Credit Score
If your credit score is below 760, then you might not qualify for the very best rate lenders offer. That doesnt mean you cant get a lower rate than what you currently have, but there is room to improve your score and boost your savings. Before you apply for a mortgage refinance, check your credit score and get a copy of your credit report.
If you find any errors on your credit report, be sure to report them to both the credit bureau and the business that made the error as soon as possible. Both parties must correct the information in order for it to change on your credit report and be reflected in your credit score.
You can bump up your credit score by paying off credit card debt and reducing how much you use your cards. If you do use credit cards for rewards and points, try to pay them off immediatelydont wait for your monthly statement to come in because your score can change daily.
Avoid applying for new lines of credit before you apply for a mortgage refinance, as credit applications can bring down your score. However, submitting multiple mortgage applications in an effort to get the lowest rate possible wont hurt your score.
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Best Mortgage Refinance Companies
A mortgage refinance loan could lower your rate or reduce your monthly paymentor both. Our picks for the best mortgage refinance companies include Better, New American, loanDepot, Reali, and Guaranteed Rate.
Many or all of the companies featured provide compensation to LendEDU. These commissions are how we maintain our free service for consumers. Compensation, along with hours of in-depth editorial research, determines where & how companies appear on our site.
If you have a mortgage and your rates are higher than you believe they should be, you may want to refinance your loan.
Refinancing could also allow you to change the type of loan you have, such as replacing an adjustable-rate mortgage with a fixed-rate mortgage. Or you can refinance to increase your loan term and reduce your monthly payments.
Whatever your motivation, you have a lot of refinance options when selecting a new loan. This guide will cover the best mortgage refinance companies, as well as provide some tips on how to select the lender thats right for you.
On this page:
- No extra fees or commission, ever
- Instant loan estimates
- Experience you can trust Over $3 billion in total funded loans
Better helps borrowers refinance loans with minimal fees and an easy online application process. You can refinance conventional, jumbo, and FHA loans backed by the federal housing administration.
Heres what you need to know about Betters refinance loans:
Home Mortgage, Refinance, and Home Equity Loans
