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Home Refinance

By Brad Stroh Oct 23, 2012
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Refinance your home
HIGHLIGHTS
  • You have many home refinance options.
  • A straight-up home refinance allows you to slash your rate and cut payments.
  • A cash-out refinance can consolidate your debt or pay for remodeling.

Explore Your Options for Tapping Into Your Home Equity, Including a Cash-Out Home Refinance or HELOC.

Home refinancing is a great way to lower your mortgage interest rate, reduce your monthly payments, pay for renovations, or consolidate your debt. However, if you are thinking about refinancing your home and have never refinanced a home before, then you need the tools, tips and lenders to make sure that you get the best refinance loan for your needs.

Before you apply for a refinance loan, read the home refinance articles, advice, FAQs, videos, lender reviews, and additional resources available at Bills.com.

In a nutshell, qualifying for a home refinance is similar to qualifying for a mortgage. A refinance lender is looking for stable income, a good credit history, and a situation where the amount of the loan is less than the value of the property. In the refinance world, the phrase used for this concept is “loan to value,” or (LTV) for short. LTV is expressed as a percentage and an ideal LTV is 80% or less.

If you want to refinance to slash your interest rate and payments, Bills.com offers two options to help you start now:

  1. Our Mortgage Calculator helps you determine whether a refinance makes sense for you.
  2. Our Quick Quote page can help you find great mortgage lenders ready with rate quotes on the best loans for your situation.

Tap Into Your Home’s Equity With a Refinance Loan

If your home has equity and you need cash, you have two options to tap into your equity: cash-out refinancing or a home equity loan. Depending on your particular situation one may be better for you that the other financially.

Mortgage Refinance - When Is The Right Time?


Home Equity Loan at a Glance

A home equity loan is a loan on the difference between the market value of your home and the balance that you still owe on your mortgage. As a separate loan in addition to your mortgage, you do not usually pay as much in the closing costs as you do when refinancing. The interest you pay may be deductible if you itemize your tax deductions. Home equity loans are a good choice if your penalties for pre-payment on your original mortgage make refinancing impossible.

Cash-Out Refinancing at a Glance

Cash-Out RefinanceA cash-out refinance is refinancing your mortgage for more than the current balance on your first mortgage. Home loan mortgage refinancing usually has a lower interest rate than home equity loans, but if you borrow more than 80% of your home’s value then you may have to pay private mortgage insurance. If you have had your mortgage long enough that you are paying more principal than interest each month or if you currently have a good interest rate, it does not make much sense to refinance and a home equity loan will probably be a better option.

Which is Best For Refinancing Your Home?

Investments in the value of your home, starting a small business, or life-saving medical treatment are all good reasons to consider a cash-out refinance. However, you may end up paying more for your total interest than if you refinance your current mortgage at a lower interest rate and take out a home equity loan for a shorter term. Your final decision will depend on what you can afford for your monthly payments and if you are comfortable paying a larger total interest in exchange for lower monthly payments and lower interest rates.

If you are interested in debt consolidation or even debt relief then you may be able to get a lower interest rate with a cash-out refinance, but you lengthen the amount of time over which to pay off your loan. You might want to look into a home equity loan with a short term or simply re-budget and tackle your highest interest debt first and try to pay off your credit cards. This last method will probably save you more money in interest paid over time.

Whether you chose a cash-out refinance or a home equity loan, in either case, failure to repay your loan can cost you your home.

Now is a good time to refinance because rates are at historic lows. We built the Bills.com Mortgage Calculator to give you a quick Yes/No answer to the question of whether a refinance makes sense for you today.

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Comments (47)


Jeri A.
Cartersville, GA  |  January 11, 2012
My husband has to refinance the marital home as part of our divorce. To remove me from the original loan what forms am I required to sign? They are trying to make me sign a TIL which shows the full amount of the refinance. I am not part of the refinance, my name is to be completely removed from any loans associated with the home. This is in Georgia.
Bills.com
January 11, 2012
My first and last thought here is to recommend you not sign any document you do not understand. I believe most people are honest and live and work with the best of intentions. I also believe a few people believe it is fine for them to take advantage of others. On to your question:

I assume the "TIL" you mentioned is the "Truth In Lending" Act disclosure a lender must give a borrower before closing a mortgage loan or refinance. You may need to sign a document acknowledging and approving the retirement of the original mortgage, and you almost certainly will be asked to sign a quitclaim deed, but I do not understand why you need to be disclosed on the new loan.

Bring any document you do not understand to your lawyer for an explanation, and assurance that someone is not trying to take advantage of you.
John J.
December 01, 2011
my house is worth 375k and i have 8 years left on a 15yr mortgage with a 75k balance, 5.125% apr...i have 40k in credit card debt with high interest rate...i can not afford to pay anymore than my current mtg payment. what is the best solution for me? John
Bills.com
December 02, 2011
Based on the information you provided your monthly mortgage payment (principal and interest) is about $954. If you were to add the $40k credit card debt and refinance into a $115k, 15 year loan, your monthly payments would be about $808, based on a 3.25% interest rate. You will also have additional saving, because you wouldn't be paying the minimum charges on your credit cards, which should be about $1000 per month currently. If your goal is to lower your payment as much as possible, you could refinance to a longer term loan. If you took out a $155,000 loan at a 30 year term at 4.25%, then your monthly payment would be about $566. If you took out a 20 year loan at 4%, the monthly payment would be about $697. Lengthening the term lowers your monthly payment, but will cost you more over the course of your loan

A disadvantage of consolidating your credit card debt in a refinance is that you would be switching your unsecured debt to secured debt. However, given your strong equity position and desire to reduce your monthly expenses, it would be financially beneficial to refinance and pay off the high interest credit card debt. Consolidating your debt is not a long term solution, if you run up your credit debt again. Take the necessary steps to avoid running up credit card debt in the future.

I recommend that you apply for a loan.
Donna T.
Norwich, VT  |  November 09, 2011
We are looking to refinance a 30 yr fixed loan. LTV and credit are excellent. Thinking about a remodel of the kitchen and baths. Do you think it makes sense to do a refinance where we can take equity out to pay for renovations. We have the funds in the bank but we could protect that and use the equity for costs. opinion? Thanks!
Bills.com
November 09, 2011
Look at your entire financial picture. It does not make sense to gut your saving account if you have enough equity in your property. On the other hand, if your family has a high net-worth, adequate retirement savings, and an active investment strategy, then a refinance to remodel may not be necessary.

As I write these words in mid-November, refinance rates are at historic lows and I cannot see them getting much lower. A refinance now to lock in a lower rate, whether you do a cash out or not, is a good idea.
Kevin S.
New York, NY  |  October 12, 2011
HELOCs are great tools to use in consolidating debt, provided the consolidator is financially responsible, or ready to become so. Also, most people don't realize, but the can use their HELOC as their primary checking/savings account. There's really no reason not to. You can use a HELOC check or debit card just like you do a checking/savings account check or debit card. By using the HELOC as your checking/savings account, you let all that money offset interest in your HELOC instead of doing nothing sitting in your checking or savings account.
Tom E.
Basking Ridge Twp, NJ  |  September 21, 2011
We have a primary mortgage and 2 additional loans that exceed the value of our home. What government programs are available to apply for?
Bills.com
September 21, 2011
The program to look into is the FHA Short Refinance program, although it requires your lenders to forgive principal balances, which would mean your two additional loans writing off as much as the entire balance. That does not seem likely.

I think your best option is to wait and see if the government releases a plan to help underwater borrowers, as is being seriously discussed at this time. Pay attention to the news that is being reported about this issue. Bills.com will certainly write about a new program, if it is rolled out.
Angela G.
Wentworth, NH  |  September 07, 2011
We have a vacation home we bought in '09 for $38k. It was seller financed and we need to refinance/pay off before 5 years. How do I go about refinancing a vacation home. We bought it in '09 for $38 w/ a 5year ARM at 7%. The house is valued at $70k now.
Bills.com
September 07, 2011
The problem I see is locating a lender who is willing to make a small mortgage loan. Contact a bank or credit union that is local to the vacation home as a starting point.
John Hoots - Chicago mortgage loans expert J.
Beverly Hills, CA  |  July 05, 2011
Sometimes you just do what you got to do and refinace. If it has to make you go for refinancing your mortgage, then so be it. It may look unfair but as long as you find it beneficial to you, you just got to refinance.
Nancy Y.
Springfield, OR  |  February 25, 2011
What kind of costs should I expect, when taking out a HELOC? I love your Web site!
Bills.com
February 25, 2011
When shopping for a HELOC, after determining that it is the right home refinance option for you, there are various costs you can expect. Some of them are the same as the fees that you pay when you take out a purchase mortgage or a standard home refinance mortgage. Your expected costs include:
  1. An appraisal fee for a property appraisal. Your lender will likely want a full, official appraisal from a licensed appraiser which estimates the value of your home. If you are in a very strong equity position, the lender may not require an appraisal or may approve a cheaper version, called a "drive-by" appraisal.
  2. Third-party closing costs. These can be a variety of costs, such as title search fees, document preparation and filing fees, and attorney's fees.
  3. An application fee. Find out if this fee is refundable, if your application is turned down.
  4. You may be responsible for certain fees that occur during the plan. Find out if your lender charges yearly membership or maintenance fees.
  5. Some HELOCs charge a fee, every time you make a transaction that draws on your line of credit.

As with any financial product, shop around to find the best deal for your home refinance needs.

Avatar
Harry L.
April 12, 2011
This is great help. I assume that these HELOC tips apply to a home refinance mortgage loan too? Thanks for helping people like us.
Bills.com
April 12, 2011
A first mortgage, second mortgage, or home equity line of credit follow the same qualification rules. What is true for a HELOC qualification is true for a refinance.
Harold R.
New York, NY  |  February 22, 2011
I have quite a bit of equity in my home, although a lot less than there used to be. Does it make sense to do a cash-out refinance, in order to pay for some home improvement projects I would like to undertake?
Bills.com
February 22, 2011
Refinancing your home may indeed be the cheapest way to finance the home improvement projects. There is probably no cheaper way to borrow a large amount of money than refinancing using the equity in your home.

You did not include enough information about your overall finances for me to say whether refinancing is your best option. Do you have any other way to pay for the home improvement projects? How affordable will your new mortgage payment be, if you take out all the cash you need to pay for your projects by refinancing?

I suggest that you speak with one of bills.com home loan mortgage lending partners, to see what kind of loan you qualify for today.

If you want to discuss your situation in detail, please call one of my Money Coaches at 888-849-0170.
Jody B.
Beverly Hills, CA  |  February 07, 2011
Thanks, Mr. Ewing. The video was very helpful in explaining what I should be thinking about when debating whether or not to refinance my mortgage.
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