Mortgage Refinance FAQ's

Refinancing a mortgage is a big step and we've got answers that can help you make decisions.

If you need real answers on mortgage refinancing, our question and answer sections for mortgage products are designed to provide real responses based upon good lending practices. Here, you'll find straight talk about how things really work and when things make sense for you and for the lender. This way, you have the best information to use as you come to your own conclusions about what works best for your situation. Please note that some answers assume you are a qualified applicant with good credit, income, and debt ratios. Don't see the answer you need for your mortgage refinance question?

When is it a good idea to consider refinancing my home?
Can you help me refinance if I am behind on my present mortgage?
How long do I have to be in my home before I can refinance?
How hard is it to qualify for refinancing?
Can my property taxes go up if I refinance?
Is there such a thing as low cost and no cost refinance programs?
If I refinance, will I still have PMI?
What if I owe more on my home than it's worth?
Are interest only loans still available with a refinance?
What loan terms are available to me for refinancing?
Can I refinance my 1st mortgage if I have a second mortgage on my home already?
If I am going to refinance, do I still need to make my current mortgage payment?
Can I still get cash-out during a refinance of my mortgage?
Can I consolidate my debt using the equity in my home?
If I am going to pay off credit cards, do I still need to pay on them?
When should I lock in my interest rate?
Will I need to get an appraisal to refinance my home?
Will I have to have a new survey done when refinancing my home?
Can I use my original title work during a refinance?
I have filed for bankruptcy, can I still refinance my home?
Can I refinance my home if I am now divorced?
Can I refinance my home if my spouse has passed away?
I have inherited a home, how do I get the home in my name?

When is it a good idea to consider refinancing my home?
There are lots of reasons to consider a mortgage refinance; however, all of these reasons should end with a tangible benefit for you. Benefits can include financing from an adjustable rate mortgage to a safe and secure fixed rate loan, shortening the terms of your existing loan, and a reduction in interest rate sufficient to make the refinance make sense. You may also want to refinance to take cash out or consolidate debt. Refinancing to get rid of PMI is not a good reason to refi your mortgage. To eliminate PMI, speak with your present mortgage holder and they will provide you with the necessary steps you need to go through to eliminate PMI. Typically, this involves obtaining a current appraisal (not older than 90 days) showing that the value of the home exceeds, by 20%, the amount owed to the current mortgage company. Check with your current mortgage company, as they may not accept appraisal ordered by the homeowner.

Can you help me refinance if I am behind on my present mortgage?
In some instances, we can utilize the FHA loan program to refinance a home in which a borrower has been late on one or two payments. In these instances, we will have to show compensating reasons for why the payments were late and that mortgage is current and remains current. There may be other programs made available through government legislation which are designed to help homeowners out of resetting adjustable rate mortgages.

How long do I have to be in my home before I can refinance?
Within the mortgage industry there is something called seasoning, which traditionally plays a role when a refinance is allowed to occur. Typically, a mortgage is considered seasoned after 12 consecutive mortgage payments have been made. In some instances, exceptions to refinancing a home can be made with sufficient compensating factors. This policy was implemented within the mortgage industry to control the process used by investors known as "flipping."

How hard is it to qualify for refinancing?
Qualifying to refinance your home loan is not that different than qualifying to purchase your home to begin with. It does tend to be a little easier, as you have had the opportunity to show you can make your payments (affordability) in a timely fashion. Your credit will still be a factor, as will you income and debt ratios. Provided nothing has changed from when you originally took out your loan, refinancing shouldn't be that difficult.

Can my property taxes go up if I refinance?
Something to account for is the fact that your property taxes are subject to change should you take out a new mortgage. State statutes vary, so you will want to check with you local county property appraiser's office to find out the answer. If you purchased your home during the housing boom, there is a higher probability that your taxes may actually be reduced. Further, if you feel the county has "over reached" on the value of your home based upon today's housing values, you can contact your local county appraiser's office and submit the appropriate official request to have your home reassessed. Oddly enough, counties have no problem raising your property taxes quickly in a market where home values are going up (if you refinanced or purchased during this time period); however, they may take their sweet time to reassess the value of your home downward, as most states, by statute, cap the amount they increase you property taxes annually.

Is there such a thing as low cost and no cost refinance programs?
Yes and no. As they say, in life, rarely is anything free. One way or another, you pay for it in some way. Like life, a no cost refinance usually builds the cost of the refinance into the amount of interest you pay. About the closest thing to a no cost/low cost refinance is the FHA streamline refinance program. Even then, you still have to pay third party costs -- and if you want no lender/origination costs (i.e. you don't want to see the loan officer get paid), it will be charged into the interest rate.

If I refinance, will I still have PMI?
PMI is a factor of loan-to-value (LTV). Private mortgage insurance is used to offset the risk of making a loan. If your LTV is 80% or less, you should not have to pay PMI. However, if your LTV is greater that 80%, then yes, you will be required to pay PMI.

What if I owe more on my home than it's worth?
This is a growing trend. There may be a government program designed to help you refinance your home. However, these types of programs are not designed for cash-out or debt consolidation. Sometimes, these types of issues are best resolved through mortgage mitigation. Other options include a Chapter 13 bankruptcy, in which the difference between the value of the home becomes an unsecured debt. A bankruptcy attorney is better served to answer these types of legal questions.

Are interest only loans still available with a refinance?
Yes, when you do a mortgage refinance, the interest only payment is available for some loan products.

What loan terms are available to me for refinancing?
When you refinance, available repayment terms will depend upon the type of loan product you choose. In some instances, a 40 year repayment term may be available (subject to market conditions). The more traditional terms of 30, 20, 15, and 10 year repayment terms are available as well.

Can I refinance my 1st mortgage if I have a second mortgage on my home already?
The short answer to this question is yes, you can. The more concise answer says if you're not going to be consolidating your existing first and second mortgages into a new loan, the current second mortgage holder must agree to subordinate their lien on your home. Typically, this is not a problem, provided you are not taking cash out/consolidating debts and significantly increasing the 1st mortgage principal balance beyond the costs to close. If you are taking cash out or trying to consolidate debt, the probability is that your second mortgage holder will not subordinate their lien.

If I am going to refinance, do I still need to make my current mortgage payment?
The proverbial horror story starts with this question. If a mortgage originator tells you not to continue paying your mortgage during the refinance process, fire them on the spot and report them to the company they work for! This tactic is used to trap you into a loan, usually with higher fees or a higher rate -- making the loan officer a lot more money. Once you go thirty days late, and it is a brand new late, you are done! You'll either take the mortgage they give you, or you won't get one for another 8 to 12 months. So, ALWAYS continue making your present mortgage payment until you have signed the closing documents. Any overpayments you make will be refunded to you.

Can I still get cash-out during a refinance of my mortgage?
At any time during the mortgage origination process (the process by which the mortgage originator is putting your file and paperwork together), you can request to get cash out. If you wait until underwriting is done, your closing will be delayed; however, you can still take cash out. Just note that if you locked your rate in, there may be a cost to extend it. In addition, there is typically a "clip" (rate adjustment) for cash out that is based upon the final LTV (loan-to-value) of the mortgage. When you let your loan officer know what you're wanting, they will explain to you what your options are, based upon your specific scenario.

Can I consolidate my debt using the equity in my home?
Absolutely. Provided you have sufficient equity in your home, you can use that equity to consolidate debt. You will need to have qualifying income and debt ratios, along with meeting the credit requirements of the particular mortgage refinance program in order to qualify. By using your equity to relieve pressure within the home when it comes to personal finances, consolidating can have a positive outcome. If you've gotten yourself into a lot of debt, we also recommend you consider attending a local credit counseling class offered by a not-for-profit. These classes usually are free and can help to ensure that in the future you don't find yourself in the same position again.

If I am going to pay off credit cards, do I still need to pay on them?
Absolutely. Even missing a $10.00 minimum payment can kill your loan! This is another "gotcha" that some mortgage originators will try to pull, telling consumers not to pay credit cards and other obligations being consolidated and then timing the closing of your loan so that you have no choice but close with them -- and their bonus income (your higher rate). Your only option is not being able to consolidate your debts. It's a nasty scenario. It cost one person we know an additional 8K in cash that they were supposed to get back at the closing table that instead went to the sleazy mortgage broker that pulled this stunt. Don't fall for it. If a mortgage originator tells you not to pay your creditors, you need to fire them and report them immediately to the branch they are working for!

When should I lock in my interest rate?
In a market where rates are trending upwards, it's ideal to lock your rate as quickly as possible. When rates are trending downward, you'll want to keep an eye on the bond market. In either case, it's suggested you ask your mortgage originator when you should lock. When locking, try to lock your rate in for at least 45 days and ideally 60 days. This will allow plenty of time for delays in documentation and underwriting.

Will I need to get an appraisal to refinance my home?
Typically, yes -- you will need to get a current appraisal. If housing values within your area are trending downward, the lender may even require two appraisals. A lot will depend upon the amount you are financing. A dual appraisal usually occurs with very high value properties.

Will I have to have a new survey done when refinancing my home?
Typically, you'll be able to use your existing survey. Review your current survey documents with your mortgage originator for further instructions.

Can I use my original title work during a refinance?
Usually, the answer is yes. You mortgage originator will be able to provide specifics as to what additional title work must be done, based upon your specific circumstances.

I have filed for bankruptcy, can I still refinance my home?
This is one of the tougher questions. If you are in a Chapter 13 and have made your mortgage payments on time, a trustee can approve a refinance of your existing mortgage. If you've filed Chapter 7 bankruptcy, exceptions can be made via the FHA loan. However, a mortgage originator will really need to know all of the specific details prior to providing a direct answer.

Can I refinance my home if I am now divorced?
Yes, if the divorce judge issued the final decree awarding you the property. If the property or portions of the equity in the property are shared with the spouse, you may have to "buy-out" the spouse with their share of the equity. If the ex-spouse has an interest in the property, they will be required to sign off on the the new mortgage arrangement. If they have no financial interest in the property you do not need your ex-spouse to sign off. If they are still on the deed, however, you will want to consult with your divorce attorney on what steps you need to take to remove them prior to starting the process of refinancing your home.

Can I refinance my home if my spouse has passed away?
Yes. Please consult with an attorney on the steps you need to take to remove your spouse from the deed. Once this is done, you'll be able to easily refinance your home.

I have inherited a home, how do I get the home in my name?
If you've inherited a home, you will need to refinance that home into your name. Please contact a mortgage originator to begin the process of taking ownership of the inherited home. You will also most likely want the services of a local attorney.