Intro to Mortgages / Refinance

Refinancing Your Current Mortgage

What is Refinancing?

Refinancing is the process of paying off your original mortgage and replacing it with a new one. If your current financial situation is different from what it was when your first mortgage was originated, you may benefit from a refinance. And with the COVID-19 pandemic reducing mortgage rates, now may be the time to act. Common refinance programs include  FHA Streamline Refinances and Reverse Mortgages.

Why Refinance Your Mortgage?

Though many are hesitant, refinancing your mortgage can actually lead to a variety of positive outcomes, such as obtaining a lower interest rate. If interest rates today have lowered from what they were at the time your original mortgage was taken out, you could refinance your mortgage to acquire these lower rates. This can result in smaller monthly payments while paying off your mortgage and building home equity at a more rapid rate. Although adjustable rate mortgages usually come with initial low interest rates, the fluctuating rates can become frustrating. It’s possible to refinance to a fixed rate mortgage to help better prepare for your monthly payments.

The Refinance Process

The refinance process can generally be broken down into 5 basic parts:

  • Determining if a refinance would be beneficial
  • Getting your credit in check
  • Shopping around for lenders (at least 3)
  • Applying for the loan
  • Making a decision

Because you’ve already obtained a prior mortgage, refinancing tends to be a much smoother process with far less paperwork


Like all other mortgage loans, refinancing comes with fees. If the cost of the refinance is more than the amount you’ll be saving, a refinance probably isn’t worth it. You can calculate how long it will take for the refinance to pay for itself by dividing your monthly savings from the total closing costs. This is why it is also important to consider how long you plan to stay in your house. If the duration of time it will take to break even on your refinance is greater than the duration of time you plan to keep the house, then you probably shouldn’t refinance. Chances are that you’ll only qualify for a lower rate if your credit score has improved since the origination of your first mortgage. If you’ve been current on your mortgage and other monthly payments, you’ve probably increased your overall credit score. If your credit is less than stellar, consider taking measures to improve your score before proceeding with a mortgage refinance.  Your debt to income ratio must also be considered when qualifying for a lower interest rate. If you’ve acquired a significant amount of debt since your first mortgage, you may not qualify for a lower rate.