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November 2019

Refinancing Assumptions

Ooooh… There are many scary urban-legends about Refinancing. Well, it’s time to call in the mortgage Mythbusters to debunk these tall-tales! We’ve broken down some Refinancing rumors below and laid out the facts for you (So you may judge for yourself!).

  1. Keep it simple- just go with your current lender.

Not true- you should always shop around for better Mortgage Rates, terms, and conditions with others. Every Mortgage Lender is different and, as their own stand-alone business, they are hungry for clients! So with that being said, don’t be afraid to negotiate with Mortgage Loan Officers and ask for a breakdown of costs up-front (These lists usually come in the form of a Worksheet or as part of a Mortgage Loan Estimate.). As a matter of fact, you could save thousands by taking out a new mortgage with a different Lender. So get out there and compare Mortgages to find competing options.

  1. After paying closing costs, you really won’t save that much.

Not necessarily true; For example, if you plan to stay in your home for a long period of time after receiving a much lower Mortgage Rate and/or APR, alter the term of your loan in a certain manner or change the loan amount on your Refinance, you could save a LOT of money on Monthly Mortgage Payments. Plus, if you plan to consolidate debt with Refinancing, or take cash out of your equity, it may be worth paying the fees & costs

There are also alternatives to paying upfront fees (which can also be helpful if you don’t plan to stay in your home long-term); such as a “no-cost mortgage” or you can save money on closing costs by utilizing Lender Credits (This is when the borrower agrees to a higher monthly interest payment in exchange for the lender covering a specific amount of the closing costs.) . Take time to sit down and crunch the numbers- perhaps you’ll be pleasantly surprised!

  1. You have to have 20% in equity to be eligible for a Refinancing

Not true. Like the original Mortgage, you may still be able to take out a Mortgage Loan with less than 20% down- you may just have to pay PMI. The same rule applies to Refinance; in regards to having less than 20% equity in your home, you may just have to pay monthly mortgage insurance (PMI). 

However, much of it may depend on what type of refinancing (Refinancing with a cash-out option, consolidating your debt, etc.) you wish to do and what options are given to you by the Mortgage Loan Officer.

  1. Refinancing is taking out another mortgage

This is also a misconception. Refinancing works by giving homeowners access to a new Mortgage Loan that replaces the existing one. The details of the new mortgage loan can be customized by the homeowner, include the new loan’s mortgage rate, loan length in years, and amount borrowed. Refinances can reduce a homeowner’s monthly mortgage payment, access cash for home improvements, and cancel mortgage insurance premiums, among other uses.


Still curious about Refinancing? Have additional questions? Contact us here.

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