Before refinancing, view our guide on How to Tell When it is Time to Refinance.
A. Rate and Term Only
A rate and term refinance pays off your the mortgage or mortgages on your property and also finances closing costs. Generally, you can refinance up to 100% of the value of your home. For the first 12 months after you buy your home the value is the lower of the purchase price or the appraised value. After 12 months, the value of your home is based on the current appraised value. CAUTION: If you have taken out a home equity line on your home and have run up this line within the past 12 months, paying off a first mortgage and your home equity line could be considered a cash out refinance (see below). This may affect how much of your home you can borrow against. The only exception to this rule is if you can document with receipts that all funds were taken out for home improvements. If so, you can usually count the refinance as a rate and term refinance and refinance up to 90% of the value of the property
Rate and term refinance loans carry the same interest rates as for first mortgage purchase loans. Borrowers can refinance up to 80% of the value of their home as long as they are paying off the first mortgage and closing costs without the need for mortgage insurance. Borrowers can usually refinance up to 95% of the value of their home using either mortgage insurance or our combination loan program program that avoids mortgage insurance costs. In some special cases, borrowers can refinance up to 100% of the value of their home.
These rules generally apply to jumbo as well as conventional loan amounts, but the maximum percentage of a home that can be refinanced decreases as loan amounts increase over $650,000.
B. Cash Out Refinance
This is a new first mortgage on your home that will pay off your existing first and/or second mortgage(s) and closing costs and also give you cash back. For example, if you have one first mortgage for $100,000 and a second mortgage for $20,000, a new mortgage of $150,000 would be considered cash out because you would receive $30,000 (less closing costs) after paying off the first and second mortgages.
Cash out refinance loans carry the same interest rates as for first mortgage loans as long as the loans are conforming conventional loans (under $322,700) for a single family home. Borrowers can refinance up to 75% of the value of their home in a cash out refinance without mortgage insurance and with credit scores as low as 620.
Borrowers have two options for obtaining cash out refinances up to 80% of the value of their home. One is to obtain mortgage insurance coverage, which will result in an extra monthly charge. The other is to obtain an automated loan approval or have a 680 credit score. The second option eliminates the need for mortgage insurance.
At this time, borrowers with jumbo loans (greater than $322,700 for single family homes) are limited in cash out refinances to taking out no more than 75% of the value of their home without having to pay a higher interest rate than standard interest rates.
Get Pre-Approved at No Charge
We encourage all refinancing home owners to submit an application for a pre-approval to determine your financial and credit position at no charge.
