Even though interest rates have been rising, so has home equity. And if you've been holding onto your mortgage for a while, you might be considering refinancing your home.
There are two main reasons why you might want to refinance:
Cash Out Refinance: If you have a lot of equity in your home, you might want to tap that for various reasons, from home improvements and repairs, to eliminated or consolidating other debts.
Lower Interest Rate Refinance: If you have a higher interest rate mortgage, you can save money each month by refinancing your loan to a lower interest rate.
Shortcut: If you just want to know if refinancing is right for you, check out Credible Mortgage. They are the kayak for loans, and you can quickly compare top lenders in minutes.
See your rates at Credible Mortgage here.
1. Caliber Home Loans
Caliber Home Loans has been around since 2013, but is actually a merger of several companies that have been in the home loan market for years.
Caliber offers a full suite of home loan products and refinancing products, including traditional loans, FHA, VA, and USDA loans, and even construction loans.
Caliber also offers financing options for second homes and investment properties.
The great thing about Caliber is that they do offer some non traditional financing options for borrowers that may need some additional assistance.
2. Guaranteed Rate
Guaranteed Rate offers a wide variety of mortgages online, including conventional, FHA, VA, USDA and jumbo mortgages for both purchases and refinances.
You will need a minimum credit score of 620 (600 for FHA loans), a stable income and a well-established credit history. Guaranteed Rate works with borrowers who may not have a high down payment, but are otherwise good candidates for a new loan.
They are up front with fees of $1,040 for the loan origination fee and a $150 application fee, they give a $250 credit for Digital Mortgage customers, which helps offset the costs.
3. JMAC Lending
JMAC Lending is another lender that offers a full suite of home loan products and refinancing products, including traditional loans, FHA, VA, and USDA loans, and even construction loans.
They also offer a variety of non conforming loan products as well.
You likely don't recognize the JMAC name, because they typically provide their offerings through a variety of brokers or wholesalers. However, they offer very competitive rates and terms.
4. Lending Tree
LendingTree is another online comparison tool similar to Credible above. We like Credible a bit more because they handle the loan process from start to finish, while LendingTree helps you find the best rate and then hands you off to that lender.
What I like about them, though, instead of having to go to multiple different lenders and enter your information to get a quote, you can get multiple offers right on their site.
They make the process easy to enter your information, and in about 5 minutes you’ll know what you’re potentially approved for.
5. Loan Depot
Loan Depot calls itself America's Lender, and has originated over $150 billion in loans. They are the fifth largest mortgage company and second largest non-bank consumer lender in the United States.
Loan depot offers a variety of mortgage products, including loan refinancing, FHA, VA, USDA, and more. They also offer home equity loans and even personal loans.
As a result of their size, the offer highly competitive rates and terms for their mortgages.
6. Quicken Loans
Quicken Loans is probably one of the most well known mortgage lenders - as their commercials for Quicken Loans (and their app Rocket Mortgage) are all over TV, especially sporting events.
Rocket Mortgage provides first-time homebuyers FHA-backed loans, as well as refinancing products offered by Freddie Mac and Fannie Mae that require down payments as low as 3%. Once approved, you can lock your interest rate and print out an approval letter.
If your loan application is denied, you can speak or chat online with a mortgage banker to find out why and what you can do to be approval-worthy.
We like Quicken Loans because of how easy it is to get your refinancing done online.
Reali is the millennial mortgage refinancing company. It offers an online loan application process that can provide a loan approval in less than an hour instead of usual three days.
Reali is good option for candidates with higher incomes and higher credit scores. Lenda evaluates candidates based on credit history, documentation, underwriting and regulatory compliance.
While Reali doesn’t charge a loan origination fee, it adds its costs into the interest rate. Still, there are no upfront origination or broker fees.
Reali isn't available in all states yet, but it's a great company to check out and compare if you live in a state they service.
Stearns is another lender you've probably never heard of, but another solid choice for your mortgage refinancing needs. They have been around since 1989, and pride themselves on excellent customer service to help their customers get the financing they need.
However, Stearns offers a variety of refinancing options, including both fixed rates and ARMs, cash out refinancing, renovation refinancing, and jumbo refinancing loans. They also offer VA refinancing and VA interest rate reduction refinance loans.
SoFi is another mortgage lender that most people associate with student loans, versus mortgages. However, SoFi has offered mortgages for the last few years, and they have a really easy online process (just like they are known for with their student loans).
SoFi offers flexible lending options to applicants that would be traditionally rejected. While other lenders are likely to reject applicants based on credit scoring criteria and debt-to-income rations, SoFi will examine disposable income and other indicators of responsible borrowing habits as criteria for loan approval.
SoFi requires a minimum loan amount of $100,000.
UWM stands for United Wholesale Mortgage, and is the largest wholesale mortgage lender in the United States. UWM works with mortgage brokers and financial institutions to provide mortgage lending, including mortgage refinancing.
They offer a wide variety of mortgage refinancing products, including jumbo refinancing and variable rate loans.
See how UWM compares on Credible.
The Requirements To Refinance Your Mortgage
The requirements to refinance your mortgage are a bit different than other loan types. Beyond your own income and credit score, lenders also look at your home equity as well.
Lenders will typically look at:
If you don't meet all of these requirements, you likely won't qualify for a mortgage refinance. Even if you meet the income and credit requirements, you also typically have to have at least 25% equity in your home as well.
Credible Mortgage can let you know in minutes if you would potentially qualify.
Things To Consider When Refinancing
When you're looking at the best banks and places to refinance your mortgage, there are quite a few considerations. Every bank or student loan lender has its own unique perk or angle, and you have to take that into consideration when weighing your options.
However, in general, the big things to consider when refinancing your mortgage include:
While there is no "right" or "wrong" loan type when it comes to your individual situation, we believe that most borrowers would benefit from either getting a lower interest rate or a shorter loan term. Borrowers should look for loans that have no origination fees, and if you're going for a cash out refinance, the lowest interest rate possible.
Cash out refis typically have a slightly higher interest rate than the best ones available.
However, every person has different needs and a different situation. Think about your loan needs accordingly.
How No-Cost Mortgage Refinancing Works
With interest rates so low, and going lower by the day, many people are thinking about refinancing their homes. One ploy that mortgage companies use to incentivize refinancing is the “No Cost” Refinance.
When calculating your return on refinancing, most people look at the savings realized versus these costs. However, now there are companies that are waiving these fees – for a price.
When you refinance, you have to pay fees. Here is a breakdown of some common fees for a $400,000 loan.
- Origination Fee: $1,190
- Prepaid Interest: $384
- Flood Insurance: $19
- Tax Fee: $65
- Escrow: $450
- Recording: $25
- Doc Fee: $20
Grand total: $2,153
You current monthly payments would be $2,147. If you refinanced to 4%, you new monthly payment would be $1,910 – a savings of $237 per month. So, you would get your money back on the cost of the refinance in about 9 months.
With a no-cost refinance, you never get the best rate, you pay a higher rate. Essentially, your fees are being rolled into the interest rate, and the company will get paid back through the higher interest payments.
If you wanted a no-cost refinance, you would most likely only be able to get a rate at 4.5%. It would lower your monthly payment to $2,027, which is still a savings of $120 per month. However, here is where it is important that you look at the total interest paid and see the deal you are really getting.
Total Interest Paid at 4%: $287,478
Total Interest Paid at 4.5%: $329,626
The bottom line is that you should usually pay your own costs to get the lowest rate.
Mortgage refinancing isn't for everyone. However, if you're able to afford extra on your loans and want to save on interest, or are looking to cash out some home equity, mortgage refinancing can make sense.
These are the top mortgage refinancing companies, and you'll strongly benefit from comparing your options amongst these lenders.
If you love one of these companies - let us know and help other readers out!
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.