Are you happy with your mortgage rate? According to the U.S. Census, nearly two out of three American homeowners have a mortgage. But with mortgage rates steadily on a steady decline over the past several years, many homeowners aren’t getting the best possible rate on their mortgage, which is potentially costing them hundreds, or even thousands, of dollars each year.
If you’re one of the unlucky homeowners whose mortgage interest rate is sky high, we have good news. You too can take advantage of the current low mortgage rates by refinancing your home.
Mortgage refinancing allows homeowners to effectively take out a new mortgage to pay off the existing one, replacing their mortgage payment with one at a new, and lower, rate. There are upfront costs associated with mortgage refinancing, but even with those added fees, it may still lead to significant long term savings.
|Lender||Current Rate||Key Feature|
|Chase||3.625%||Convenience and flexibility|
|Rocket Mortgage||3.99%||Quick online approval|
|SunTrust Bank||3.700%||Wide variety of loan options|
|Bank of America||4.00%||Flexible options with discounts for customers|
|Guaranteed Rate||3.750%||Easy online application|
|Alliant||3.750%||Low equity mortgage loans|
|Navy Federal||2.875%||Good rates for military members|
What Is Mortgage Refinancing?
Mortgage refinancing occurs when you take out a mortgage to pay off and replace an existing mortgage. There are several reasons why mortgage refinancing can be beneficial. Let’s take a look at what those are.
- Reduce your monthly payment: You might be able to reduce your monthly payment with a lower interest rate.
- Change the length of the loan: You could reduce the loan period and pay off your mortgage faster with less in interest in the long term.
- Change the type of mortgage:Some homeowners want to change the type of mortgage they have, switching from an adjustable to a fixed-rate mortgage or getting rid of FHA insurance.
- Take advantage of a cash-out refinance: You could refinance an amount higher than your current mortgage, keeping the difference in cash in what is called a cash-out refinance.
When refinancing, you’ll want to pay close attention to the mortgage rate. This is the amount of interest that you will be charged annually. Since mortgages are such high-value loans, even one-tenth of a percent difference in rate will have an impact.
Mortgage Refinancing vs Home Equity Loans
If you have a large amount of equity in your home and would like to tap into its cash value, you might consider a cash-out mortgage refinance or a home equity loan. Cash-out refinances usually make the most sense if you can reduce your interest rate. However, a home equity loan could be the better option if interest rates are higher. This type of loan is taken out in addition to your current mortgage and must be paid back in a shorter amount of time.
Mortgage Refinancing vs HELOCs
HELOCs, or home equity lines of credit, are different from mortgage refinancing in that you receive access to a line of credit instead of a lump sum. You can withdraw from the line of credit as needed and only pay back what you borrow. These flexible loans are good short-term options for those who don’t want to permanently refinance.
Top Mortgage Refinancing Lenders
Chase’s convenient and flexible mortgages can be applied for in person, on the phone or online. This makes it easy to get mortgage refinancing even if you’re not located near one of the bank’s physical locations. Chase has a specific set of refinancing rates separate from its lower mortgage rates.
If you’re in a pinch and need to get approved for mortgage refinancing quickly, Rocket Mortgage’s fast online approval process will come in handy. Choose from 15- and 30-year repayment periods, in addition to YOURgage®, a custom mortgage that allows you to set the term anywhere between eight and 30 years.
SunTrust offers a wide variety of refinancing options, including loans in 15- and 30-year terms as well as easier-to-obtain FHA loans and VA loans for veterans. This does mean that you’ll have to provide personal details to get a more accurate interest rate, since so many products are available.
Bank of America
As a major bank, Bank of America is able to offer a full catalogue of mortgage refinancing options. If you’re an existing Bank of America customer, you might also be eligible for discounts. Preferred Rewards clients can get a reduced mortgage origination fee.
While many banks require you to speak with a representative to get approved for any type of mortgage, Guaranteed Rate lets you do everything online. It’s quick and convenient to get approved for a mortgage refinance. Guaranteed Rate is also more lenient than other providers who might deny you based on your finances.
Alliant is a great mortgage lender for homeowners who want to refinance without a lot of equity. Mortgage refinances are available with as little as 5% equity. Take advantage of this if you’re looking for a cash-out refinance.
For military service members, Navy Federal’s mortgage refinance rates are extremely affordable and flexible. If you’re worried about being approved for a better rate, Navy Federal will take other factors into consideration, such as a history of making rent payments on time.
The Impact of a 0.1% on $1,000
Even small changes in mortgage rates will make a difference in your payments. For every $1,000 of your mortgage, you’ll save even more by refinancing. A mere .1% change on a $300,000 mortgage would make a difference of $228 per year, reducing your payment by up to $684 over three years, and by up to $1,140 over five years.