Mortgage Refinancing

Refinancing means replacing or changing your mortgage to access equity, change the loan amount, restructure debt, change amortization or achieve another financing objective. It usually requires a new qualification and may involve penalties or fees.

A standard refinance is commonly limited to total secured borrowing of up to 80% of the lender-accepted property value, subject to qualification. The cash available is lower after existing secured debt, payout amounts and costs. Some specific programs have different limits, so 80% is not a promise of accessible cash.

Common reasons include debt consolidation, renovations, investment, buying another property, major expenses, separation or divorce, improving cash flow, or restructuring higher-cost debt.

If you refinance before the maturity date, your existing lender may charge a prepayment penalty. The calculation depends on the mortgage type and contract, so I review the payout statement and compare the penalty against the potential benefit.

Refinancing with a federally regulated lender normally requires qualification at the applicable minimum qualifying rate. The requirements for other lenders and products vary. An alternative lender is not automatically exempt simply because it is described as a B lender; the specific institution and transaction must be checked.

Not always. A refinance can lower monthly payments by moving expensive debt into a lower-rate secured loan, but it can also extend repayment over many years and put your home at risk if payments are not made. The total cost and repayment plan should be considered.