Should I Refinance My Mortgage?

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Norah Tanner, part of the Houzd Mortgage Team, is explaining mortgage refinances and when they might be the right choice for you. Let’s take a look.

Refinancing can be a powerful financial tool, but it’s often misunderstood. At its core, a refinance simply replaces your current mortgage with a new one. The goal is usually to improve your financial situation. That could mean lowering your payment, saving on interest, or accessing home equity.

Let’s break down how refinancing works, the different types of refinances, and when it might make sense for you.

 What Is a Refinance?

 When you refinance, you take out a new loan that pays off your existing mortgage. The new loan comes with its own:

  • Interest rate

  • Loan term

  • Monthly payment

  • Closing costs

Your home remains the collateral; only the loan terms change.

 Common Reasons People Refinance

 Homeowners refinance for many different reasons, including:

  • Lowering the interest rate to reduce monthly payments

  • Reducing the loan term (for example, going from a 30-year to a 15-year loan)

  • Switching loan types (FHA to Conventional, ARM to fixed-rate, etc.)  

  • Removing mortgage insurance

  • Accessing home equity for cash

There’s no one-size-fits-all reason. Refinancing is about aligning your mortgage with your current goals.

 Types of Refinances

 Rate-and-Term Refinance

This is the most common type of refinance.

  • Changes the interest rate, loan term, or both

  • Does not include cash back

  • Often used to lower payments or pay the loan off faster

 Cash-Out Refinance

A cash-out refinance allows you to borrow more than you currently owe and take the difference in cash.

  • Uses your home’s equity

  • Commonly used for home improvements, debt consolidation, or large expenses

  • Results in a higher loan balance

 FHA, VA, and USDA Streamline Refinances

These are simplified refinance options for government-backed loans.

  • Limited documentation

  • No appraisal in many cases

  • Designed to lower payments or interest rates

Eligibility depends on your current loan type and payment history.

 The Refinance Process Step by Step

 While refinancing feels similar to buying a home, it’s usually much simpler. Here’s what the process typically looks like:

  1. Review your goals – Decide what you want to achieve by refinancing

  2. Apply for the loan – Income, assets, and credit are reviewed

  3. Home value is confirmed – Usually through an appraisal

  4. Loan is underwritten – The lender verifies all details

  5. Closing – You sign new loan documents, and the old loan is paid off

Most refinances take 30–45 days from application to closing.

 What About Closing Costs?

 Refinances include closing costs, typically 2%-4% of the loan amount. These can be:

  • Paid out of pocket

  • Rolled into the loan

  • Offset by a lender credit with a slightly higher interest rate

A good loan strategy looks at the break-even point - how long it takes for the monthly savings to outweigh the costs.

 When Does Refinancing Make Sense?

 Refinancing may be a good option if:

  • Interest rates are lower than your current rate

  • Your credit score has improved

  • You plan to stay in the home long enough to recoup closing costs

  • Your financial goals have changed

It may not make sense if you’re planning to sell soon or if the costs outweigh the benefits.

 Refinancing isn’t about chasing the lowest rate. It’s about creating a mortgage that works better for your life today than it did when you first bought your home.

 Whether you’re looking to save money, pay off your home sooner, or tap into equity, understanding how refinances work helps you make confident, informed decisions.

Contact us at the link below if refinancing is right for you.

Contact Norah & Team
Contact Melissa