Refinancing your mortgage can be a great way to save money, change the terms of your loan, or even take some money from the capital of your home to use for bills or renovations. There are many reasons why you might want to refinance, and it's important to understand the process and the potential benefits. A mortgage refinance replaces your current home loan with a new one. This can help you lower your interest rate, reduce your monthly payments, or take advantage of the equity in your home.
You may also want to refinance to pay off the loan faster, eliminate FHA mortgage insurance, or switch from an adjustable-rate to a fixed-rate loan. If you have an FHA loan with timely payments of at least six months, you can request a simplified refinance from an FHA-approved lender six months after your first payment or seven months (210 days) after the closing of the original loan. A cash-out refinance combines a new mortgage with a cash loan backed by the home's equity, which can be used for home improvement projects or any other purpose you choose. When considering a refinance, it's important to compare prices and compare each lender's current mortgage interest rates, availability, and customer satisfaction scores.
You may also want to consider a refinance with no closing cost, which usually means that the lender covers your closing costs in exchange for a higher interest rate. It's also important to note that a modification should only be considered if you can't qualify for a refinance and need long-term payment assistance. Most mortgage buyers don't risk refinancing “too soon” and can apply even soon after their previous loan closes. However, you should wait six to seven months before using a simplified refinance to replace your original mortgage.
Beyond these time restrictions, there are other practical issues to consider before deciding if refinancing makes sense for you. For example, you could refinance a 30-year mortgage to a 15-year mortgage and repay the loan much sooner.