Refinance

The primary reason to refinance is to save money. If you have a $350,000 loan at 7.5% and can refinance to 6.5%, your monthly payment drops from $2,448 to $2,212—saving $236/month. With $5,000 in closing costs, your break-even is about 21 months. If you stay in the home longer, you save money. A common rule of thumb is that refinancing makes sense if you can drop the rate by at least 0.75–1.0%.

Cash-out refinancing lets you tap home equity. If your home is worth $500,000 and you owe $300,000, you might refinance to a new $400,000 loan and receive $100,000 cash (minus closing costs). Borrowers use cash-out refinancing to pay for home improvements, consolidate high-interest debt, fund education, or cover large expenses. The trade-off: you're increasing your loan balance and potentially extending your loan term.

Refinancing has the same qualification requirements as a purchase mortgage—credit check, income verification, appraisal, and underwriting. The process typically takes 30–45 days. Refinancing with a direct lender can streamline the process since underwriting, rate locks, and closing are all managed in-house—reducing the number of parties involved and often accelerating your timeline. Costs are similar to purchase closing costs: 2–5% of the loan amount. FHA, VA, and USDA all offer streamline refinance programs with simplified qualification for existing borrowers.