If you’re like many homeowners, a sizable percentage of your budget goes toward your home loan each month. A mortgage refinance could help make those payments more manageable by lowering your interest rate, changing your loan term, or eliminating mortgage insurance. You could also tap your home equity with a cash-out refinance, which lets you borrow more than you owe while pocketing the difference.
Whether you’re looking for the best mortgage refinance rates—or the best cash-out refinance mortgages—it’s helpful to know how long the refinance process might take. Here’s what to expect, plus some tips to ensure that all goes as smoothly as possible.
Reasons to refinance a house
A refinance replaces your existing loan with a new mortgage to save money, make your monthly bills easier, or access the equity in your home. Here’s a look at the most common reasons to consider refinancing:
Lower interest rate. A more favorable interest rate reduces your monthly payment and long-run interest costs.
Change loan term. A shorter loan term might lower your rate, reducing your monthly payment and the overall cost of the loan. A longer loan term can decrease your monthly payment by giving you more time to pay.
Change loan type. Adjustable-rate mortgages (ARMs) start with a lower rate, but periodic adjustments can lead to higher rates and bigger payments. Converting to a fixed-rate mortgage makes budgeting easier, and you might lock in a lower rate.
Eliminate mortgage insurance. Refinancing can help you get rid of mortgage insurance if you have at least 20% equity in your home from payments or appreciation.
Access home equity. A cash-out refinance lets you borrow more than you owe, and you can use the cash to pay for home repairs, debt, or other expenses.
How to apply for a refinance
Applying for a refinance is similar to obtaining a purchase mortgage. While the process varies by lender, here are the general steps.
Check your credit report
A strong credit score helps you qualify for the lowest interest rates and fees. It’s a good idea to check your credit early so you have time to fix any problems before applying. You can request a free copy of your credit report every 12 months from each credit reporting company at AnnualCreditReport.com.
Gather your documents
Your lender will ask for various financial documents, including:
Tax returns, W-2s, and 1099s.
Pay stubs (or profit-and-loss statements if you’re self-employed).
Debt statements.
Bank, investment, and retirement account statements.
Proof of homeowners insurance.
Compare rates and closing costs
Rates and terms vary, so comparing quotes from at least three lenders is advisable. Consider the closing costs (such as application, appraisal, attorney, and title search fees), which can run from 2% to 6% of the loan.
Mortgage calculators like this one can also help you determine if refinancing will save you money.
Get an appraisal
Depending on the loan type, you’ll need a home appraisal to confirm your home’s value and set the new loan amount. If you have an existing government-backed mortgage, you might be able to skip the appraisal by using a Federal Housing Administration ( FHA) streamline refinance, a VA interest rate reduction refinance loan (IRRRL), or a U.S. Department of Agriculture (USDA) streamlined assist refinance loan.
Close on the loan
The final step is to sign the paperwork and pay the closing costs. If it’s a cash-out refinance, you’ll get your money three days later. The right of rescission gives you three days to cancel the loan if you change your mind.
How long does it take to refinance a house?
A refinance usually takes about 30 to 45 days to complete, though the exact timeline depends on your situation and the type of loan you apply for. For example, a streamlined refinance doesn’t require income verification or an appraisal, which can speed up the underwriting process—and get you to the closing table faster.
What can delay a refinance?
Several factors can delay the process, including some that are out of your control.
Appraisal delays. An appraisal that comes in low could slow or halt the refinance process, or the appraiser’s visit could be postponed if they have scheduling issues.
Lender backlogs. There is more demand for loans and refinancing when interest rates are low, making it difficult for lenders to keep up with applications.
Paperwork delays. Underwriting—and, therefore, the closing—can be delayed if you don’t get the required paperwork to your lender promptly.
Credit snags. Any recent changes in your financial situation or credit history, such as a drop in income or a higher credit utilization ratio, can cause delays. The underwriter must evaluate if the change will affect your ability to repay the loan.
Rate lock expiration. You might lock in an interest rate early in the refinancing process. If the lock expires before you close on the loan, you’ll have to work with the lender to possibly extend the rate lock or get a new rate entirely.
Title complications. If the title company finds a home equity line of credit (HELOC) or some other lien against the property (besides your current mortgage), you’ll have to sort that out before proceeding with the refinance.
Ways to speed up the refinance process
While delays are unavoidable in some situations, you can take steps to ensure the process goes as smoothly as possible.
Make sure you qualify. Before applying for a mortgage refinance, consider if you’ll meet the requirements. For example, you’ll need a credit score of at least 620 to refinance into a conventional loan or 580 for an FHA or VA loan. You’ll also need a debt-to-income ratio (DTI) no higher than 50%, though most lenders prefer a DTI of 43% or lower.
Organize your documents. Having your documents ready can make the application process go more smoothly. Your lender may ask for your two most recent tax returns, W-2s, and 1099s; your two most recent bank, investment, and retirement account statements; and your two most recent pay stubs. If a spouse or other person is applying for a refinance with you, the lender will also need to see their documents.
Prepare for the home appraisal. A strong appraisal keeps the refinance process moving forward. Research comparable sales in your neighborhood so you know what similar homes are selling for, and collect documents to share with the appraiser—including land surveys and records for any recent improvements. You’ll also want your home to look its best, so invest in curb appeal, tidy up, and make minor repairs.
Requirements for refinancing different types of home loans
While each lender has different requirements for refinancing, here are some general guidelines from Quicken Loans.
Money for closing costs + cash reserves
TIME Stamp: Calculate the break-even point to see if refinancing makes sense
To decide whether refinancing your home is a good idea in the first place, figure out your break-even point. A break-even point is how long it takes to recoup your refinancing costs and start saving money on your loan. To calculate the break-even point, divide your closing costs by your expected monthly savings. For example, if your closing costs are $6,000 and you save $200 a month by refinancing, it would take 30 months ($6,000 ÷ 200), or two-and-a-half years, to break even.
Refinancing makes financial sense if you plan to stay in the home beyond the break-even point—30 months in our example. However, if you intend to sell your home, refinance it again, or pay down your mortgage before the break-even period ends, you won’t recover what you spent refinancing the loan. In that case, you might consider delaying or skipping refinancing altogether.
Frequently asked questions (FAQs)
How fast can you refinance a house?
Mortgage refinancing typically takes 30 to 45 days, though it can take more or less time, depending on your situation.
Does refinancing affect your credit score?
Refinancing can temporarily lower your credit score by a few points because lenders will make a hard inquiry on your credit report. You can minimize the impact by submitting all your loan applications within a short period: Multiple loan inquiries made within a 14-to-45–day period usually count as one inquiry.
Your credit score may also take a hit because you’ll close out a long-standing credit account (your current mortgage) when you refinance. Still, your credit score should improve as you make on-time payments on the new loan, provided everything else in your credit report remains positive.
Can you refinance from 30 to 15 years?
One reason to refinance your mortgage is to change the loan term. Refinancing from a 30-year loan to a 15-year loan should save money in the long run. Shorter mortgages tend to have lower interest rates, and you’ll pay interest for fewer years.
However, your monthly payments will be higher because you’ll have less time to repay the loan. Use a mortgage refinance calculator to determine if it makes financial sense to refinance—and be certain you can comfortably afford the higher payments.
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