Understanding your options

There are three primary options for refinancing your mortgage, each with its own costs and benefits — personal and financial.

If you are considering refinancing your mortgage, there are several options — each designed to meet specific goals. Be sure to talk with your lender about the costs and benefits of each option as refinancing will require both time and money.

No cash-out refinance

With a no cash-out refinance you are primarily refinancing the remaining unpaid balance on your mortgage. This is the most common option and may make sense if you’re looking to:

  • Lower your mortgage rate. If mortgage rates are lower than when you closed on your current mortgage, refinancing could reduce your monthly payments and the total amount of interest that you pay over the life of the loan.

  • Move from one mortgage product to another. If your current mortgage is an adjustable-rate mortgage (ARM) and it no longer makes sense for your financial or personal goals, refinancing your loan can put you in a more secure and stable mortgage, such as the 30-year fixed-rate mortgage.

  • Build equity faster. If your financial situation has improved since your purchase, you may consider refinancing to a loan with a shorter term (e.g. from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage). Your payments will most likely be higher – even if you refinance into a lower mortgage rate – but you can build equity faster, own your home sooner and pay less in total interest.

Cash-out refinance

If you’ve built up significant equity through your monthly payments and your home’s appreciation, a cash-out refinance may make sense to improve your general financial situation or the value of your home through improvements.

With a cash-out refinance, you’re refinancing your mortgage for more than you currently owe and, in return, getting a portion of your equity back in cash. Cash-out refinances generally have a slightly higher mortgage rate because you are borrowing more money, which is an added risk to the lender making the loan.

Freddie Mac Enhanced Relief Refinance

If you would like to refinance but your loan-to-value ratio (how much you owe on your mortgage compared to the home’s appraised value) exceeds the maximum allowed for a standard no cash-out refinance product, an Enhanced Relief Refinance might make sense for you. To be eligible for this option you must meet the following criteria:

  • Freddie Mac must own your loan. Use our Loan Look Up tool to find out.

  • The note date of your loan being refinanced must be on or after October 1, 2017.

  • You must be current with your payments with no 30-day delinquencies in the most recent six months and no more than one 30-day delinquency in the past 12 months.

  • Your mortgage being refinanced must not have been previously refinanced through HARP, a federal program launched in 2009 that expired on December 31, 2018.

An Enhanced Relief Refinance Mortgage may help you obtain a monthly payment you can afford, by reducing your mortgage rate and monthly payment, replacing an ARM with a fixed-rate mortgage or reducing your mortgage term (e.g. from 30 years to 15 years).

Reach out to your lender to discuss your refinance options. Remember, you do not have to use your current lender to refinance your loan. In fact, it’s in your best interest to meet with multiple lenders and compare their Loan Estimates to determine which lender offers the best terms and cost. It may take more time, but these extra steps can save you thousands of dollars over the long haul.

Remember, your new loan will have a new rate and term and you’ll be responsible for all costs associated with the refinance.

Working with your lender