Refinance 101
Refinancing your home can help you lower monthly payments, access equity, or pay off your mortgage faster. Explore how refinancing options can unlock savings and financial flexibility tailored to your unique goals.
Reasons to Refinance
Get Cash Out
A cash-out refinance allows you to leverage the equity you’ve built in your home to receive a lump sum of cash. This option is ideal for homeowners looking to finance major expenses such as home renovations, medical bills, or even college tuition. By refinancing for an amount greater than your current mortgage balance, you can use the difference for your financial needs while potentially securing a better interest rate. This can be a cost-effective alternative to high-interest credit cards or personal loans.
Popular uses include:
- Debt Consolidation: Pay off high-interest debt like credit cards.
- Home Improvements: Increase your home’s value through renovations.
- Large Purchases: Cover significant expenses such as medical bills or educational costs.
Lower Payment
Lowering your monthly mortgage payment is one of the most common reasons homeowners choose to refinance. By refinancing to a lower interest rate or extending your loan term, you can reduce your monthly financial burden, freeing up cash for other expenses. This is particularly beneficial if you’re planning for major life changes such as retirement or saving for your children’s education.
Key benefits include:
- Save on Interest: Lock in a lower interest rate to reduce the total cost of your mortgage.
- Increase Monthly Savings: Lower payments can free up money for savings or investments.
- Remove PMI: If you’ve built up enough equity, refinancing can help eliminate private mortgage insurance (PMI), further reducing your monthly payment.
Shorten Loan Term
If you’re looking to pay off your mortgage faster and save on interest over the life of the loan, shortening your loan term could be the right choice. By refinancing from a 30-year mortgage to a 15- or 20-year term, you’ll pay less in interest and build equity more quickly. While your monthly payments may increase, the long-term savings and faster debt elimination can be significant.
Benefits of shortening your loan term:
- Save on Interest: Pay less interest over the life of the loan.
- Build Equity Faster: Increase your home equity at an accelerated rate.
- Own Your Home Sooner: Achieve mortgage-free living more quickly.
Today’s Mortgage Rates
These are our current mortgage rates for some of our most popular loan programs.
Rates are updated daily. Please keep in mind that the interest rate you will qualify for depends on many factors, including your credit, your loan amount and your down payment. For a personalized mortgage quote, please get started online.
Legal Disclosures
Conventional 30-year Fixed-Rate Loan:
The estimated payment on a $325,000, 30-year Fixed-Rate Conventional Loan with a 15 Day Lock, FICO score 760, and loan-to-value (LTV) 95%. The quote above includes two points. One point is equal to one percent of your loan amount. Payment does not include taxes and insurance. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.
Conventional 15-year Fixed-Rate Loan:
The estimated payment on a $325,000, 15-year Fixed-Rate Loan with a 15 Day Lock, FICO score 760, and loan-to-value (LTV) 95%. The quote above includes two points. One point is equal to one percent of your loan amount. Payment does not include taxes and insurance. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.
VA 30-year Fixed-Rate Loan:
The estimated payment on a $325,000, 30-year Fixed-Rate VA Loan with a 15-day lock, FICO score 760, and loan-to-value (LTV) 95%. The quote above includes two points. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply. VA loans do not require PMI. The VA loan is a benefit of military service and only offered to veterans, surviving spouses and active-duty military.
FHA 30-year Fixed-Rate Loan:
The estimated payment on a $325,000, FHA 30-year Fixed-Rate Loan with a 15 day lock, FICO score 760, and loan-to-value (LTV) 95% Payment includes a one-time upfront mortgage insurance premium (MIP) at 1.75% of the base loan amount and a monthly MIP calculated at 0.8% of the base loan amount. For mortgages with a loan-to-value (LTV) ratio of 95%, the 0.8% monthly MIP will be paid for the first 30 years of the mortgage term, or the end of the mortgage term, whichever comes first. Thereafter, the monthly loan payment will consist of equal monthly principal and interest payments only until the end of the loan. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.
Assumptions
Lenders calculate rates using assumptions: basic loan details. For all rates shown, unless otherwise noted, we assumed:
- You’re buying or refinancing a single-family home that’s your primary residence.
- If refinancing, you’re not taking cash out.
- Closing costs will be paid up front, not rolled into the loan.
- Your debt-to-income ratio is less than 30%.
- Your credit score is over 760.
- You’ll have an escrow account for payment of taxes and insurance.
Disclosures
- Mortgage rates can change daily.
- Some loan options may not be available in all states.
- Some jumbo loan options may not be available to first-time home buyers.
- Lending services may not be available in all areas.
- Some restrictions may apply.
- The rate lock period is 15 days.
Refinance FAQs
Refinancing a mortgage means that you are applying for a new loan to replace your existing mortgage loan. The choice to refinance a mortgage will likely be motivated by lowered mortgage rates, meaning the new loan will be more favorable and align with your personal and financial goals. This newly refinanced mortgage could offer financial stability, cash flow for other expenses, a shorter loan term and/or eliminating mortgage insurance.
Depending on your goals, refinancing a mortgage can be the right decision. If you are looking to shorten your loan term, free up capital through a cash-out refinance, lower your monthly payment or move from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, refinancing may be the best choice for you. Homeowners should also plan to stay in their home for an extended period of time if they are going to go through a refinancing. There will be costs associated when refinancing your mortgage that you will have to be prepared for, such as closing costs and other fees, some of which can be rolled into your loan. The interest rate at the time of the refinancing can save you a significant amount of money, so choosing the right time to refinance is essential. A good mortgage refinancing rule of thumb is to refinance when you can decrease your rate by a full percent.
There are a number of reasons to refinance your home, including:
- Decreasing monthly mortgage payments with a lower-fixed rate.
- Accessing higher monthly cash flow for other expenses.
- Switching from an ARM to a fixed-rate mortgage eliminating variable rates.
- Benefiting from equity you’ve earned in your home to pay for home improvements, education or debt consolidation.
- Reducing the term of the loan to save money on interest in the long run.
- Eliminating PMI payments incurred from a smaller down payment at the time of original home purchase.
A mortgage refinance calculator can help you determine what your payments will be if you do a mortgage refinance.
Typically, the amount of time after purchase you have to wait to refinance depends on the lender. Most lenders will base your ability to refinance on the amount of equity you have your home, rather than the length of time you’ve owned the home. Speaking with an experienced loan originator like Mutual of Omaha, can be the best way to discover when a mortgage refinance is right for you. However, there can be reasons to refinance within 6 months of purchase, including a steep drop in interest rates, change in marital status, significantly improved credit score, or a need to switch from a 15-year mortgage to a 30-year mortgage, or from an ARM to a fixed rate. Unless you paid cash for your home, it is often in your best interest to wait six months before refinancing.
The refinance process timeline will vary depending on the lender and how quickly you are able to provide documentation. The average time to complete a mortgage refinance ranges from 3-45 days, with streamlined refinance programs averaging 15-30 days.
When refinancing a mortgage, if you plan to do a cash-out refi, lenders may suggest waiting six months between mortgage refinances. Cash-out refinancing is a loan that pays off your mortgage, and a cash out refi can be for more than your existing loan allowing you to use the difference towards home renovations or other expenses. You must have significant home equity in order to do a cash-out mortgage refinancing. Rate-and-term refinancing, which is done to get access to more favorable interest rates or negotiate better terms, can be done as many times as it makes sense for your personal financial situation.
Additional Resources
Buyer’s Market or Seller’s Market? 10 Key Indicators Every Agent Should Track
Beyond the List Price: Understanding the True Cost of Homeownership
How to Help Clients Understand & Adapt to Market Shifts
Ready to Refinance?
Our experienced loan officers at Mutual of Omaha Mortgage are ready to guide you through every step of the refinancing process. Explore your options, lower your payments, and take control of your financial future today.
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