5 Things You Need to Do to Prepare for a Refinance

Refinancing your mortgage can be a smart move to improve your financial situation, but it’s not something you want to rush into unprepared. Whether your goal is to lower your interest rate, consolidate debt using your home’s equity, add/remove someone from your mortgage, or adjust your loan, setting yourself up for success starts with preparation and education. In this guide, we’ll walk you through five key steps to help you feel confident and ready to make the most of your refinance. Set Your Refinance Goals There are a lot of reasons you might want to refinance, with specific programs that will help you achieve your specific goals. That’s why the most important first step of a refinance is determining why you want to refinance. Is your goal to save money by lowering your monthly mortgage payment? Maybe you want to cash out some of your equity to pay off high-interest debt like credit cards or auto loans. Perhaps you want to use your equity to pay for a home renovation project. Or you might have an FHA loan that you want to turn into a conventional loan to get rid of your mortgage insurance premium payment. A refinance can help you achieve any of these goals. Before you get the ball rolling on your refi, it’s important to identify those goals so you know what kind of refinance works best for you. Not entirely sure of your goals? See the top 3 reasons why homeowners choose to refinance their mortgage with UMortgage for some inspiration. See How Much Equity You Have If you want a conventional refinance, lenders typically require a minimum of 20% home equity. Your equity is the difference between your home’s current market value and your mortgage’s remaining principal balance. For example, if your home is appraised at $300,000 and your mortgage’s remaining principal balance is $150,000, then you have 50% or $150,000 in equity. You can find your remaining mortgage balance on the same site where you pay your mortgage each month. For an accurate assessment of your home’s market value, you’ll need to get it appraised. Appraisals are a mandatory part of the refi process, which we’ll touch on later. Use UMortgage’s Refinance Calculator for an estimate of your refi options. Review Your Finances Just like the mortgage process when you bought your home, lenders will need to review your current financial picture to determine the refinance options and loan terms that you qualify for. This includes your credit score, income, debt, and available assets. For example, when you apply for your refinance, you’ll need to provide an up-to-date credit score. A higher score (typically 740 or higher) can unlock the most competitive rates, while a lower score might mean higher rates or more limited options. Beyond your credit score, you’ll also want to review anything that could prevent you from qualifying. Think about things like tax liens, recent debt delinquencies, or a high debt-to-income ratio. Addressing those issues ahead of time will expedite the refi process, improve your chances of approval, and get you better terms. You’ll also need to factor in closing costs, which typically range from 2–5% of your loan amount. You can pay these out of pocket, roll them into your new loan, or ask your UMortgage Loan Originator about a no-cost refinance. Finally, gather all necessary documentation for your application. That includes: Recent pay stubs or proof of income W-2s or tax returns Bank statements Documentation for any large deposits or financial gifts Having these prepared can help you navigate the refinance process more smoothly and confidently. Connect With a UMortgage Loan Originator The most important step in the refinance process is connecting with a mortgage expert who can help you understand your options and guide you toward the best solution for your goals. When you work with a UMortgage Loan Originator, you gain a strategic mortgage partner invested in your long-term financial well-being. They’ll help you understand what’s possible now and what steps to take to improve your position if now isn’t the best time for you to refinance. With their support, you can feel confident knowing you're making the best decision for your financial future. Ready for an expert’s insight? Fill out this form to get connected with a UMortgage Loan Originator in your area. Prepare Your Home for a Refi Appraisal Just like when you first bought your home, your refinance will require an appraisal. The appraiser’s job is to estimate your home’s current market value, which helps determine how much equity you have. That number can impact everything from the rate you’re offered to how much cash you can access if you’re doing a cash-out refinance. While you can’t control the market or magically add square footage, you can take a few smart steps to make sure your home shines during the appraisal. Start with the basics: clean up, declutter, and take care of any small repairs you’ve been putting off. Things like chipped paint, leaky faucets, or broken fixtures can influence the appraiser’s overall impression of your home and impact your value. Next, make sure your home is up to code when it comes to health and safety standards. Check that smoke and carbon monoxide detectors are installed & working. If the appraiser can’t verify that your home meets the necessary standards, it could delay your refinance or even affect your eligibility. Finally, don’t be afraid to advocate for your home. If you’ve made any significant improvements (like updating your kitchen, replacing your roof, or installing new flooring), create a list to share with the appraiser. It’s a great way to ensure your upgrades are seen and factored into your home’s value. Eager to learn more about your refi options? Click here and fill out the form with your refinance goals, and we’ll get you connected with a UMortgage Loan Originator near you who will help you get the process started. If you want to do more independent research about the refinance process, dive deeper with our resources below! How to Refinance Your Mortgage Three Reasons to Refinance Your Home Loan UMortgage’s Refinance Calculator How a Cash-Out Refinance Can Balance Your Budget Your Credit Score’s Role in the Mortgage Process

The holiday season is coming up, and for many, this time of year can put families through financial strain. Between gifts, travel, and festive gatherings, the expenses can quickly add up, leaving some feeling stretched thin. For homeowners, a cash-out refinance can be an effective way to access the equity in their homes, providing extra funds to cover holiday costs without relying on high-interest credit cards or personal loans. By using the equity they've built, homeowners can enjoy a more relaxed and financially stable holiday season. What is a Cash-Out Refinance and How Does One Work? A cash-out refinance allows homeowners to replace their current mortgage with a new loan that provides extra funds by tapping into the equity homeowners have built in their property. Essentially, homeowners can "cash out" a portion of their equity to use however they like—whether it’s to pay off high-interest debt, fund renovations, or, in this case, cover holiday expenses. This process works by allowing homeowners to borrow against their home equity, which is the difference between the home’s appraised market value and the remaining mortgage balance. By taking out a larger loan, the borrower receives the excess in cash after paying off the original mortgage. For a clearer picture of how this can work, use UMortgage’s Refinance Calculator to see what a cash-out refi might look like for you. For a more in-depth quote, fill out this form to connect with a UMortgage Loan Originator or reach out to your existing UMortgage partner. Home equity is a valuable asset that accumulates over time as mortgage payments are made and property values appreciate. With a cash-out refinance, homeowners can leverage this value without selling their property, providing access to funds when needed most. The Benefits of a Refi for Debt Consolidation & Holiday Spending While credit cards might seem like a tempting way to cover holiday expenses, the high interest rates can quickly make seasonal spending hard to manage. According to the Federal Reserve, the average credit card interest rate is currently around 22.76%, which can lead to a cycle of unmanageable debt. “There’s a lot of high interest out there, and people are carrying more debt than they’ve ever carried,” says Jimmy Hobson, UMortgage’s National Sales Leader. “A cash-out refinance not only helps you avoid this kind of debt but also gives you a way to tap into your home’s equity that you’ve already built through monthly mortgage payments.” With a cash-out refi, instead of taking on even more debt, you’re using the money you’ve already invested instead of relying on high-interest credit cards or personal loans. After you’ve closed your refinance, you'll get some breathing room before your first mortgage payment, typically due on the first of the month following a full 30 days after closing. So, if you close on November 14th, you won’t make your first mortgage payment until January 1st. This means you could benefit from having a month without a mortgage payment, freeing up extra funds that can be helpful for holiday spending or unexpected expenses. How to Know You’re Eligible for a Cash-Out Refinance Before you start planning your refinance, it’s important first to assess your eligibility and whether it makes sense for your current financial picture. Here are some things to consider: Assess Your Home Equity You should start by calculating your home equity to determine if you qualify for a refi. Your equity is the difference between your home’s current market value and what you still owe on your mortgage. You’ll need an appraisal to determine your home’s market value. A UMortgage Loan Originator will be able to connect you with a reliable appraiser in your area to help you determine the equity owned on your home. Reviewing Your Long-Term Goals There are many benefits to a refinance, but ultimately, you should only do it if it fits your long-term goals. Would it be more beneficial to use your home’s equity to invest, make home improvements, or save for the future? Taking out funds now can impact your mortgage balance and monthly payments, so consider how this aligns with your plans and whether it will keep you on track for achieving financial stability or growth. Get Connected with a UMortgage Loan Originator A UMortgage Loan Originator is your key to personalized mortgage advisory that puts your long-term financial health first. Once you get connected with your LO, they’ll walk you through every step, from eligibility to planning and ultimately unlocking your home’s potential to give you a smart, effective option for covering seasonal expenses. Follow this link and fill out the form to get connected with a UMortgage LO in your area. A cash-out refinance allows you to rely on the investment you've already made in your home, helping to cover seasonal expenses while keeping your financial health in check. Whether for gifts, travel, or end-of-year projects, using your home’s value wisely can make all the difference in enjoying a stress-free holiday season. Follow the link above to see if this option will work for you this holiday season!

Understanding VA Interest Rate Reduction Refinance Loans (IRRRLs) If you're a military homeowner with a VA home loan, you may be able to lower your monthly payments through a VA Interest Rate Reduction Refinance Loan (IRRRL). A VA IRRRL, often called a "VA Streamline Refinance," is a simplified way for veterans to refinance their existing VA-backed home loan. This program allows you to replace your current VA loan with a new one, typically offering a lower interest rate or more stable payment terms. Below, we’ll outline the benefits you can unlock with an IRRRL, the requirements to meet before you qualify for an IRRRL, and what the process looks like to unlock these savings. Benefits of a VA IRRRL With an IRRRL, homeowners can unlock countless benefits to save money both immediately and in the long term. The primary benefit of an IRRRL is to replace your existing mortgage with one that has a lower interest rate, thus lowering your monthly mortgage payment and interest paid over the life of the loan. Unlike traditional refinances, IRRRLs require very minimal documentation, making the process move a lot quicker than a conventional refi. Homeowners can often get an IRRRL without paying any cash out of pocket by rolling closing costs and fees into the loan balance. This means you’re saving money from your first new payment. If you bought your home with a VA loan, you’re probably familiar with the VA funding fee. The good news with an IRRRL is that when you refinance, non-exempt borrowers only have to pay a 0.5% funding fee. This fee can also be added to the loan balance, meaning no money out of pocket at closing. Finally, a VA IRRRL doesn’t use any of your VA loan entitlement, ensuring that you’re set up for success if you have entitlement remaining when the time comes to buy your next home. How to Know When You’re Ready for an IRRRL Before you get an IRRRL, you need to check the three boxes outlined below to make sure that you maximize these benefits: 210 Days Since the First Payment on the Original VA Loan First and foremost, your closing date for your new loan needs to be at least 210 days after you made your first payment on the loan that you’re refinancing, and you must have made at least 6 consecutive monthly payments on that loan. These requirements are set by law to protect you from predatory lending practices. Qualify for a Rate at Least 0.5% Lower Than Your Current Rate Second, the interest rate you qualify for needs to be lower than your existing interest rate by at least 0.5%. Refinancing includes additional costs such as closing costs, title fees, and other associated charges. If the interest rate reduction is too small, the monthly savings might not be enough to recover these upfront costs in a reasonable time frame. By waiting for a 0.5% or greater rate reduction, you increase the likelihood that the savings from refinancing will recoup these costs relatively quickly. Recoup Your IRRRL Costs Within 36 Months That takes us to the final and most important requirement. To make your IRRRL worthwhile, you need to make sure you recoup these additional costs via your new, lower monthly payment in 36 months. These three requirements act in tandem with each other. Rates take a combination of economic conditions and time to drop by at least 0.5%. The more you reduce your interest rate, the faster you’ll recoup the savings unlocked with your IRRRL. With all things related to your mortgage, it’s important to work with a Loan Originator who will help you get the most out of your IRRRL and can find a solution that keeps more of your money in your pocket. That takes us right into step 1 of the IRRRL process: working with a loan originator who can guide you through your IRRRL without slamming you with unnecessary added fees. The IRRRL Process: Streamlined Refinancing Getting an IRRRL is generally simpler than a regular refinance. Below, we’ll outline the easy, 6-step process for getting an IRRRL: Find an experienced VA loan originator: By working with an experienced LO, you will ensure that you’ll receive honest and straightforward financial advice with a personalized IRRRL experience that provides terms that work best for you and you alone. Provide basic information: You'll need to certify that you previously occupied the home, but current occupancy isn't required. Skip the appraisal: In most cases, no new appraisal is needed for an IRRRL. Minimal credit checks: While the VA doesn't require a credit check, some lenders may still request one. No income verification: Unlike regular refinances, IRRRLs typically don't require income documentation. Close on your new loan: Once approved, you'll sign the new loan documents and start enjoying your lower payments. Remember, while IRRRLs are designed to be straightforward, you need to ensure that the new loan provides a tangible benefit, such as lower monthly payments or a more stable rate structure. Taking advantage of a VA IRRRL allows you to save money on your monthly mortgage payments while enjoying a simplified refinancing process. If you're interested in getting a free quote from a VA loan expert, fill out this form to get the ball rolling on your mortgage savings!