Compare Mortgage Refinance

From mortgage types and qualifying to mortgage related fees and financial reputation, we research everything you need to compare mortgage refinance and make a decision. Learn how our editors compare the different factors of mortgage refinance below.
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Mortgage Refinance is paying off your existing home loan by replacing it with a new one, with new rates and terms. Most homeowners refinance to obtain better interest rates, change the duration of the loan, to consolidate debt, to tap into home equity to finance a large purchase, or to switch between fixed or adjustable of rates.

Mortgage Refinance can be a great solution to help lower monthly payments when interest rates have dropped, or because your credit score has improved significantly and you can therefore obtain a better rate. It can also shorten the life of your loan if you can afford steeper monthly payments, and help you change between types of interest rates.

The crucial factors to consider when choosing a mortgage refinance lender are the type of loan they offer, the difference to the life of your current loan, the difference in monthly payments, whether closing costs and fees make the refinance unviable, and how long you’re planning on staying in your home. Before starting to comparison-shop, ask yourself what you wish to obtain through the refinance, and if it makes sense as part of a larger financial plan for your future.

For instance, if you’re not planning on staying in your home long enough to recoup the closing costs, refinance may not be advisable. Another possibility is refinancing for a larger amount than your current mortgage, by tapping into your home equity, but this means taking on more debt and paying more interest in the long run. A similar problem occurs when you refinance to a longer term, which lowers your monthly rate, but extends the life of your loan, forcing you to pay more interest. Lastly, refinancing to consolidate and pay off high-interest debt can backfire if it’s not accompanied by effective budgeting.

How we Compare Mortgage Refinance

Mortgage Types - 25%
Qualifying - 20%
Mortgage Related Fees - 25%
Financial Reputation - 15%
Reviews & Support Service - 15%

Mortgage Types

There are four major ways with which you can choose to refinance your home. The first is a rate and term refinance, where you renegotiate either the rate and the term of your mortgage, or both. For instance, you may refinance your 5/1 ARM after five years, because the current low mortgage rates might keep your monthly payment the same, without the risks inherent in an ARMs' ever-changing rates. Another option is the cash-out refinance, in which you pull equity from your home. This raises the overall loan balance, but offers the benefit of immediate cash on hand, which you can use for home repair, college, debt repayment, or unforeseen expenses. The opposite of that is the cash-in refinance, in which you bring cash into the process, perhaps because you had a windfall, or simply to keep the loan-to-value ratio low. A fourth option comes from the government. In response to the ongoing mortgage crisis, the federal government developed the Home Affordable Refinance Program (HARP). This initiative refinances homes for 125% of their value, as a tool to help "underwater" homeowners whose loan amounts are higher than the current market value of the property, which must be insured by either Fannie Mae or Freddie Mac. If you think you qualify, be advised that the program ends in December 2017.

As regards rates and specific loan types, here's a quick outline: 

Conventional Loans - these are not insured by a federal agency. They can come in many different forms, including fixed-rate, ARMs, conforming, non-conforming, jumbo, etc.

Adjustable Rate Mortgage - With this type of mortgage, you pay a fixed, low introductory rate for a period of time, and then each following year, your rate changes according to the market. For instance, a 7/1 ARM means you pay a low fee for seven years, and from the eighth year onwards, your rate changes annually. This type of mortgage can be ideal if you have a reasonable expectation of increased future earnings, or if you don't plan on living on the property once the fixed rate period is up.

30-year Fixed Rate Mortgage - This is the most commonly used mortgage, especially for first-time buyers. Interest rates remain fixed for the thirty years it takes you to pay off the loan. This gives homeowners long-term stability and helps with budgetary planning, as each monthly payment never changes. These mortgages work best for homeowners who expect to remain in one house for a long period of time, and don't wish to have a high monthly fee.

15-year Fixed Rate Mortgage - This builds the same stability as the 30-year FRM, but with higher monthly payments. Equity builds faster, and you end up paying less interest overall.

 

The following are government-insured mortgage refinance options:

HARP - If the loan for your primary residence in held by either Fannie Mae or Freddie Mac, was originated on or before May 31, 2009, you're current on your mortgage, and the total amount of your loan is larger than your home's current valuation, this type of refinance can be a great option for you. 

FHA Cash-out - This type of refinance, offered by the Federal Housing Administration, is convenient for those whose property has increased in market value since it was purchased. It allows homeowners to take out another mortgage for more than they currently owe, and therefore take cash out of their home equity.

FHA Streamline - This option is available for existing owners of an FHA mortgage. It allows them to refinance quickly, often without an appraisal, and features the added benefit of cutting down on paperwork and additional costs.

VA Interest Rate Reduction Refinance - This can only be used by homeowners already in posession of a VA mortgage loan. It streamlines the process, and can significantly reduce monthly payments by taking advantage of lower interest rates. Closing costs can even be rolled over into their overall loan amount, requiring no out-of-pocket expenses.

VA Cash-Out Refinance - Both holders of VA and conventional mortgages can qualify for this option. It replaces your existing mortgage, and gives you the opportunity to turn your home equity into cash, (for up to 100% of its value). 

USDA Streamline Refinance - This is only available for current holders of non-delinquent 502 USDA loans (either Direct or Guaranteed), and should be used to lower the monthly interest and premium payments, not to take cash out of the home equity.  However, the program does allow for up to 102% refinancing, with the money to be used for home improvement. As with any streamlined option, it requires less paperwork, closing costs and no property inspection.

Mortgage Refinance with the Best Mortgage Types:

LendingTreeLoan DepotSoFiRocketRefinanceCalculatorQuicken LoansRate MarketplaceLendingTree VAAmeriValueMilitary Mortgage VA Loan
15-year Fixed Rate
30-year Fixed Rate
Adjustable Rate
HARP
FHA Cash-out
FHA Streamline
VA Interest Rate Reduction
VA Cash-out
USDA Streamline

Qualifying

As with any type of mortgage, lenders specializing in home refinance are going to look at a number of factors in order to determine your suitability. Knowing the requirements beforehand makes the application and approval process much easier and efficient. Companies are going to be looking at:

  • Employment and Income - Lenders will want to look at pay stubs, (generally for the past three months).
  • Tax returns - Usually, your W2 and/or 1099's for the last two years.
  • Debt-to-Income Ratio - This includes both housing-related debt and all additional recurring monthly debt
  • Credit Score - Lenders don't just look at the credit reports from all three bureaus, but also take into account if there is any derogatory credit such as bankruptcy or foreclosure (this can make you ineligible).
  • Statement of Assets - Lenders like to see between 3-6 months of mortgage payments in reserve.
  • Homeowner's Insurance and Title Insurance
  • Collateral - This is generally in the form of home equity. To that end, most companies require an inspection and appraisal of the property.

 

 

Mortgage Refinance with the Best Qualifying:

LendingTreeLoan DepotSoFiRocketRefinanceCalculatorQuicken LoansRate MarketplaceLendingTree VAAmeriValueMilitary Mortgage VA Loan
EmploymentAt least 2 yearsAt least 2 yearsAt least 2 years2 YearsDepends on the lenderAt least 2 yearsAt least 2 yearsAt least 2 yearsNot StatedDepends on Lender
Tax Returns (W2 and/or 1099)Not StatedNot StatedNot StatedNot StatedNot StatedNot StatedW-2 FormsNot StatedW-2 FormsNot Stated
Income to Debt Ratio35% or more35% or lower50% or more50% or more40% or more50% or more50% or more35% or moreNot Stated40% or more
Credit Score580 or better580 or better620 or better620Fair620620 or better580 or betterNot RequiredFair
Statement of AssetsYesYesNoNoYesYesYesNoYesNo
Homeowner's InsuranceYesYesYesYesYesYesYesNoYesYes
Title InsuranceYesYesNoYesNoYesNoYesNoYes

Mortgage Related Fees

There are several fees included in the costs of refinancing your home. Choosing one of the streamlined refinance options we mentioned above may eliminate the need for some of them.

  • Application Fee
  • Loan origination fee
  • Appraisal fee
  • Inspection fee
  • Title Search
  • Escrow
  • Closing fee
  • Legal fees
  • Homeowners insurance
  • Private mortgage insurance (PMI)
  • Points (these are usually negotiable)

Some lenders can provide no-cost refinancing – an arrangement in which the lender agrees to pay the closing costs but charges you with higher interest rates. This can also be achieved by folding closing costs into your loan.

Mortgage Refinance with the Best Mortgage Related Fees:

LendingTreeLoan DepotSoFiRocketRefinanceCalculatorQuicken LoansRate MarketplaceLendingTree VAAmeriValueMilitary Mortgage VA Loan
Application FeeYesYesNoNoNoYesYesYesNoYes
Loan Origination FeeYesYesYesNoNoYesYesYesNoYes
Appraisal FeeYesYesNoNoNoNoYesYesNoNo
Inspection FeeYesNoNoNoNoYesYesYesNoNo
Credit Report FeeNoNoNoNoNoYesNoNoNoYes
Insurance YesYesNoNoNoYesNoYesNoNo
TaxesNoNoNoNoNoYesNoNoNoNo
EscrowNoYesYesNoNoYesNoNoNoNo
Title SearchYesYesNoNoNoNoYesYesNoNo
Lender FeeNoNoNoNoNoYesNoNoNoNo
Legal FeeNoNoNoNoNoNoYesNoNoNo
Points (Optional)YesYesNoNoNoNoNoYesNoNo

Financial Reputation

Mortgage refinance can be even more daunting than a first mortgage, with so many options to choose from. More than ever, we wanted to make sure that the companies we reviewed had high levels of customer satisfaction, so we took into account not only their scores in customer review sites, but also their legitimacy and proven track record.

 

 

Mortgage Refinance with the Best Financial Reputation:

LendingTreeLoan DepotSoFiRocketAmerisaveRefinanceCalculatorQuicken LoansRate MarketplaceGuide to LendersLendingTree VAAmeriValueMilitary Mortgage VA LoanWells FargoChaseBank of AmericaPenFed
BBB RatingA+A+A+A+No RatingA+AA+No RatingA+
Years in Operation2022531Not Stated31320Not Stated19
FHA/HUD ApprovedYesYesYesYesNoYesYesYesYesYes
No Regulatory Actions in NMLSNoYesYesNoNoYesYesNoNoYes
Registered with one of the following: NAMB, FDIC, HMDAYesYesYesYesYesYesYesYesYesYes

Reviews and Support Service

If it turns out refinancing completely isn't the right choice for you, there are several other alternatives you can rely on for taking cash out of your home's equity (the dollar value difference between the outstanding balance in your mortgage and your home's market value). We discuss these in more depth in other sections, but here's a brief description.

  • Reverse Mortgage - If you're 62 or older, and are house-rich but cash-poor, a reverse mortgage can help you obtain the liquidity you need by allowing you to convert part of your home equity into cash. As a direct opposite to a traditional mortgage, in which you pay the lender and buy your home over a period of time, in a reverse mortgage the lender pays you as a kind of advance payment on your equity. The money is generally tax-free, and doesn't have to be repaid as long as you live in your home. When you die, sell, or move, your estate must repay the loan. Ideally, this would be covered through the sale of the property, and not by saddling your estate with debt. 
  • Home Equity Loans - If you have built up enough equity on your house, you can consider the possibility of taking out a home equity loan. This uses your house as collateral, and generally feature lower APR's, tax-deductible interest costs, and can be easier to qualify for even if you have bad credit. 
  • Home Equity Line of Credit (HELOC) - This operates on the same basic principle as a Home Equity Loan, only instead of giving you a lump sum, it establishes a line of credit for you, with your house as collateral. You withdraw money as you need it, pay it off, and then use it again. Though the interest is typically much lower than a credit card, for instance, you still have to be careful if you're constantly borrowing and repaying.
  • Bridging Loan - Also known as a bridge, caveat or swing loan, this is designed to help you complete the purchase of a property before selling their current home, by offering you short-term access to money at a generally high interest rate, to compensate for the risk involved.

Mortgage Refinance with the Best Reviews and Support Service:

LendingTreeLoan DepotSoFiRocketAmerisaveRefinanceCalculatorQuicken LoansRate MarketplaceLendingTree VAAmeriValueMilitary Mortgage VA Loan
Free ConsultationYesYesYesYesYesYesYesYesNoYes
Toll-Free PhoneYesYesYesYesNoYesYesYesNoYes
EmailYesYesYesYesYesYesYesYesYesYes
Online ChatYesNoNoYesNoYesNoYesNoNo
Credit OptimizationYesYesYesYesYesYesYesYesYesYes
FAQ and Knowledge BaseYesYesYesYesNoYesYesYesNoYes
BBB Positive Reviews43%68%19%85%N/A85%0%43%N/A0%

Full Mortgage Refinance Comparison

Mortgage TypesQualifyingMortgage Related FeesFinancial ReputationReviews and Support Service
LendingTree Mortgage Refinance9.79.79.99.99.8
loanDepot Mortgage Refinance9.08.09.09.59.0
SoFi Mortgage Refinance8.59.09.08.08.75
Rocket Mortgage Refinance8.09.09.38.09.0
Amerisave Mortgage Refinance8.99.158.558.08.5
RefinanceCalculator Mortgage Refinance8.09.09.58.08.5
Quicken Loans Mortgage Refinance8.09.08.59.09.0
Rate Marketplace Mortgage Refinance8.08.08.08.08.0
Guide to Lenders Mortgage Refinance8.08.08.57.08.0
LendingTree VA Mortgage Refinance5.05.09.99.99.5
AmeriValue Mortgage Refinance7.07.57.17.07.5
Military Mortgage VA Loan Mortgage Refinance7.07.18.06.07.4
Wells Fargo Mortgage Refinance3.05.05.05.04.0
Chase Mortgage Refinance3.06.03.04.05.0
Bank of America Mortgage Refinance5.06.03.02.02.0
PenFed Mortgage Refinance4.03.02.06.05.0
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FAQ

Can I use a refinance to switch between an Adjusted-Rate and Fixed-Rate mortgage or viceversa?

Adjusted-rate mortgages (ARMs) start out having low interest rates for a set period, after which periodic rate adjustments can result in increases that are higher than a fixed-rate. Many people choose to finance their initial home purchase through an ARM, in the hopes that one of two things will happen once the low rates expire: either fixed mortgage rates will have lowered and they can refinance into a conventional mortgage, or they don’t plan on staying in the house once the rate begins adjusting. In a falling rate environment, the opposite strategy (fixed to adjusted rate) can be beneficial as well, since the periodic adjustments can result in decreasing rates and smaller monthly payments. As with the first scenario, converting to an ARM is a great strategy when a homeowner doesn’t have a long term commitment to the property.

Can I refinance into a shorter term?

One of the best reasons to refinance is precisely to reduce the amount of time you spend paying off your mortgage. If you have twenty years to go on your current mortgage, and refinance into another thirty-year one, whatever you save in interest rates won’t make much of a difference. On the other hand, if you can afford to turn that twenty-year into fifteen, then the shorter term, in combination with the lower rate can substantially reduce the amount of interest you’ll pay.

Am I likely to qualify for the rate that I want?

The rates quoted on major financial websites may not be applicable to you specifically. Qualifying factors for mortgage refinance are much the same as those for a primary mortgage. Lenders will take into account your credit score, full financial history, tax returns and recent pay stubs, the type of loan you want, whether you have 20% equity, and how much other debt you carry. If you’re happy with the company that handled your first mortgage, that might be a good place to start in your search for a better rate.

Should I get a cash-out refinance?

If you have unexpected medical expenses, need to pay for college, or would like to consolidate your debt, a cash-out refinance can help. Effectively, it uses your home’s equity and borrows against it. Let’s assume your house is worth $150,000, and you still owe $80,000. You want to take out $20,000. If you refinance for $100,000, you get the $20k in cash, and ideally, a better interest rate than you had on the $80k, thereby reducing or maintaining your monthly payments. If you decide to use those $20k to consolidate your debt and take advantage of the lower interest rates in home mortgages, be very careful that you don’t incur more debt. It’s important to take into account the fact that even though the interest rate may be lower, you’ll be paying it over a longer period of time, which may result in paying more interest than you would have originally. Also remember that a cash-out refinance does chip away at your equity.

What is the break-even period, how do I calculate it, and why does it matter for my refinance?

Your break-even point refers to the amount of time it will take you to start actually seeing the savings from refinancing, and offset the total costs of the new mortgage. You can calculate it yourself by adding up the total closing costs and dividing that sum by the savings in your monthly payment thanks to the new interest rate. In a concrete example, if you save $100 a month with your new rate, and your closing costs were $3,000, then your break-even point is 30 months. If you plan to stay in the house for less time than your break even period, it wouldn’t make much sense to refinance.

What is amortization and how does it work? What does it have to with refinance?

Amortization describes the way you pay off interest over the life of your loan. When you pay off debt in fixed increments over a period of time, with each payment, a portion goes toward the interest and another towards paying off the principal (the balance of the loan itself). Right when you first take out a loan, the interest rates are highest, and they decrease over time. So, ten years into a thirty-year loan, a larger proportion of your monthly payment goes toward the principal. When you refinance, since it’s a brand-new loan, the amortization process begins again from zero. This means that once again, a larger proportion of your monthly payment will go towards the interest and not towards your balance. To determine your current amortization, this calculator can be very helpful.

Is now the best time to refinance my mortgage? Will it save me money immediately or in the long run?

The truth is, this question doesn’t have one simple answer. To answer it, first take a good look at your monthly payment statement. Interest payments will usually make up a large chunk of it, especially when your mortgage is amortized over a typical 30-year period. When you can refinance at a lower interest rate for the same term, your monthly payments can go down. If you intend to stay in your house for the foreseeable future, then it makes sense to do this, and put the money you’d be saving towards larger monthly payments, so you can pay off your mortgage quicker. Conversely, if you can only refinance into a longer term, then you may end up having paid more in interest, cancelling any short-term, monthly savings. Another possibility is to lower both the interest rate and the term of the loan. This can keep your monthly payment around the same, but allow you to pay off your loan in half the time. In cases where you’re paying a private mortgage insurance (PMI) because your down payment was too small, refinancing when you’ve built 20% equity can eliminate the PMI and lower your payments. However, all of these scenarios come with a caveat. To really figure out whether a refinance will save you money, you must factor in the associated closing costs and see how long it would take you to start truly seeing those savings.

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