What is refinancing a mortgage?
Get to know the ins and outs of mortgage refinancing and the options available to you.
Refinancing can be confusing with the many financing and credit options available to homeowners. Learn what refinancing a mortgage involves and how it can benefit you.
What is refinancing?
Refinancing is a process homeowners go through to change the interest rate and/or terms of their current mortgage. In essence, refinancing is changing aspects of your mortgage. Refinancing is not taking out a second or additional mortgage, such as a home equity loan or home equity line of credit.
Doing the math
Imagine that your current interest rate is at 6.5%* (not unusual just a few years ago) and you have the opportunity to refinance at 4.5%*. Before taxes and insurance, here is how 2% impacts this monthly mortgage payment.
$1042.91 monthly payment ($165,000 mortgage at 6.5%*)
$836.03 monthly payment ($165,000 mortgage at 4.5%*)
$206.88 monthly savings
* Please note that interest rates are used as examples only and not intended to indicate actual rates currently available.
Use our mortgage calculators to see for yourself how refinancing your current mortgage with a different rate and term may impact your monthly payments.
Types of refinancing
There are several refinancing options to consider:
- Traditional – Adjusts your interest rate and/or terms.
- Cash-out – Like a traditional refinance but adds a cash-out option to receive funds at closing.
- Streamline – Can expedite the loan approval process and offer lower rates if your mortgage is with U.S. Bank.
- U.S. Bank Smart Refinance – A one-time refinancing option with no closing costs.
When to refinance
Perhaps the most common reason to refinance is to lower your interest rate and, consequently, your monthly payment as well as the overall cost of your home. The interest rate on your mortgage has a substantial impact on the amount of your monthly payments.
You also might consider refinancing if your mortgage has an adjustable rate and you want a more traditional mortgage. Or, you may be looking to consolidate debts at a lower interest rate. There are several reasons to explore refinancing.
How to refinance a mortgage
There are three steps on how to refinance a mortgage.
- Compare rates – Check out the current rates to determine which rates are best for you.
- Prequalify – Fill out a form with some of your basic information and loan details and learn how much you may qualify for.
- Apply – Once you get an idea of how much you qualify for, start the process by applying.
Want to learn more about refinancing your mortgage? We’re ready to help.
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