Refinancing readiness and navigating the process in today’s market

Depending on where you are in your homeownership journey, refinancing your mortgage can be an effective strategy to help you meet your financial goals. Refinancing may help you save money over time or add money back to your monthly budget if you score a lower interest rate. And depending on the type of refinance you choose, you could also borrow against your home’s equity to pay down debt or make a major purchase.

Understanding when and why a refinance might make sense is the first step toward getting the most from this financial tool. There are also different types of refinances to consider, and one might work better for your goals than another. 

Ennell Esperance, an HLA in New York City explains more about the refinancing process and how you can navigate it in today’s market. 

What is refinancing?

Refinancing replaces your current mortgage with a new one—usually with a new rate and/or terms. It can often also come with a new set of closing costs. It may also come with a new lender. 

So when does it make sense to refinance? You might want to consider a refinance if you want to:

• Change the loan length or lower your monthly payments
• Secure a better or lower interest rate to save on monthly payments
• Switch from an adjustable-rate mortgage to a fixed-rate one.
• Change the loan type to remove mortgage insurance costs
• Access your home equity to fund home improvements, buying another property, or consolidate debt.

How does refinancing work?
Much like your original mortgage, the refinancing process involves a thorough review of your current financial status to determine if you qualify. 

Here’s an example of what a lender may review:

• Credit score and history: Score requirements vary by lender and loan type; 620 is a general minimum for conventional mortgages. Lenders want to see responsible credit use, such as a positive payment history on your debt.
• Debt-to-income (DTI) ratio: This metric shows how much debt you have in relation to your income. To calculate your DTI, add up your monthly debt payments and divide by your gross monthly income. Then multiply by 100 to get a percentage. A low DTI lets lenders know you’ll likely be able to manage your monthly payments with minimal issues.
• Property value and equity: Many homeowners have built equity over time, and the real estate market can cause property values to appreciate as well. When refinancing, your current loan balance and market value of the property will help the lender calculate a loan-to-value (LTV) ratio. Refinancing qualifications usually prefer lower LTVs.

What are my refinancing options and how do I choose the right one?

Let’s break down a few commonly offered types of refinancing:

• Rate-and-term refinance: This option allows you to replace your current loan with a new one with a different interest rate, different term or both. The primary aim is to secure terms that better suit your current financial situation, while the principal balance remains the same.
• Cash-out refinance: A cash-out refinance allows you to replace your existing mortgage with a new loan for more than you currently owe, leveraging equity you’ve built up in your home. This type of mortgage refinance might be more suited for those who need funds for significant expenses, such as home renovations or debt consolidation.
• No closing cost refinance: A no closing cost refinance allows borrowers to refinance without paying the upfront fees usually required. The lender may charge a slightly higher interest rate or fold the closing costs into the total loan amount.

Understanding your current financial goals and needs can help you decide which option works best. 

The bottom line

Refinancing can be a smart financial move for many people. You may be able to save money in the long term, and you also have options to take cash out if that’s what would support your goals. A qualified mortgage professional or home lending advisor can help clarify whether a mortgage refinance makes sense for you and ensure you’re on the right path to achieving your financial goals.

For more information, visit chase.com/afford.

For informational/educational purposes only: Views and strategies described in this article or provided via links may not be appropriate for everyone and are not intended as specific advice/recommendation for any business. Information has been obtained from sources believed to be reliable, but JPMorgan Chase & Co. or its affiliates and/or subsidiaries do not warrant its completeness or accuracy. The material is not intended to provide legal, tax, or financial advice or to indicate the availability or suitability of any JPMorgan Chase Bank, N.A. product or service. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results. JPMorgan Chase & Co. and its affiliates are not responsible for, and do not provide or endorse third party products, services, or other content.

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