Latest news with #HELOC
Yahoo
3 hours ago
- Business
- Yahoo
What happens if you default on a HELOC or home equity loan?
Defaulting on a home equity loan or HELOC can result in the loss of your home, as it was pledged as collateral for the debt. Being in default typically occurs after four consecutive missed payments or 120 days. Defaulting also has a negative impact on your credit score and makes it difficult to secure other financing in the future. Defaulting on any type of loan is never good. However, defaulting on a home equity loan or HELOC, its line-of-credit cousin, has a much more daunting consequence: You could lose your home. Why? Because when you took out the loan, you pledged the place as collateral for the debt. If you get behind on repayments, aka 'delinquent,' the lender has a right to take your property, to recoup its money. Now, that doesn't occur overnight – a lot has to happen before an actual foreclosure. Still, a tiny section of borrowers can see those storm clouds gather. The latest data from the Federal Reserve Bank of New York shows that 0.88 percent of HELOC (home equity line of credit) accounts are delinquent by 90 days or more. While that's not a huge number, it's a noticeable uptick from the 0.52 percent of HELOCs that were in the same shape one year earlier. If you're in danger of joining those ranks, read on to understand what actually happens if you default on a home equity loan or HELOC, how the fallout will impact your finances and mortgage, and what you should do to avoid this doleful situation. To be in default on a loan simply means you have failed to make your scheduled payments on time or according to the agreed terms of the debt. Before you stay awake at night stressing about the potential to default on your home equity loan, it's important to understand that default doesn't set in after missing one payment. 'Generally, four months or 120 days of consecutive missed payments will put a loan in default and have the creditor looking to begin collection,' Pahmela Foxley, vice president of mortgage lending at Utah-based Wasatch Peaks Credit Union, says. 'This can vary from lender to lender.' Some may give you less time, some a little more. It's critical to stay well ahead of that four-month mark. Foxley says that lenders may be willing to make adjustments (for a fee) to avoid sending the loan to collections, a step that involves loads of paperwork and additional work. 'Most lenders are willing to work with their borrowers to help them,' she notes, 'so it's crucial to communicate with your lender and have them help you explore options to avoid defaulting on the loan.' In addition to worrying about the payments, you'll need to consider the fees that will likely add up in the process. Most lenders charge late payment fees for home equity loans and HELOCs. It's common to see these charges add up to five percent of the missed payment amount. Though some lenders do set maximums — Regions Bank, for example, caps its late fee at $100 — remember you'll be charged for each month you miss. Bankrate's take: If you're falling behind due to a major financial hardship – losing your job, for example – talk to your lender about forbearance, which temporarily stops or lowers your repayments. Some lenders offer forbearance options for as long as 12 months. You'll still owe the money, usually including the interest, when the forbearance period ends, but you can avoid the major damage that delinquency will do to your credit (more on that below). While home equity loans and HELOCs differ in their details, the two products work the same way if you don't live up to your obligation to make payments on time. 'Typically, there is no difference between defaulting on a HELOC or home equity loan,' Mark Worthington, branch manager at Churchill Mortgage, says. 'Both are mortgages secured against a property, so they fundamentally have the same impact on the asset in the event of a default.' The worst-case impact is foreclosure – a lengthy process that eventually leads to the lender taking possession of your home, selling it and evicting you. As with a default on your primary mortgage, it won't happen immediately. Here's a rundown of the general process: One missed payment: If you fail to make a payment during the grace period (often 15 days after the due date), you'll receive a written notice from your lender. Your next payment: Your next statement will include the past due amount, plus a late fee. Additonal missed payments: If you still fail to pay and haven't contacted the lender to discuss your options, you may receive an acceleration notice – part of the clause in your loan agreement that gives a lender the right to demand full repayment – from the lender's collections department. Notice of default: After multiple missed payments – typically somewhere between 90 and 120 days – your lender will issue a notice of default. The local real estate recorder's office in your town or county will likely receive a copy as well. Preforeclosure: The window is closing in this period. Having taken the legal action required in your state, your lender is preparing to move forward with claiming the property. However, even at this point, you have the ability to catch up your payments, request forbearance or even sell the home (which still belongs to you). Eviction and foreclosure: If you haven't managed to come to a resolution, your lender will have the right to proceed with evicting you from the property and selling or auctioning it off. But your obligations may not stop there. Let's say you owe the lender $70,000, and the home sells at auction for just $55,000. The lender could technically decide to just wipe that $15,000 off their books and move on. But often, if it's a serious shortfall, the lender likely going to do whatever it takes to get the amount repaid in full – including taking you to court. 'The lender will file [a request for] a judgment against you for the remaining balance,' Foxley says. If it succeeds,'this could lead to a wage garnishment affecting your weekly paycheck to pay the debt.' In addition to losing your home and possibly a potion of your future wages, defaulting on a home equity loan carries other serious long-term implications for your finances and financial profile. A foreclosure will remain on your credit report for seven years, so any time a company checks your credit – to rent an apartment or to consider a credit card application, for example – they're going to see a big red flag in your credit history. Keep in mind that it's not just the default, either. Making on-time payments weighs heavily on your credit score, and since you have missed multiple months, your credit score will likely be in poor shape. According to a data analysis of more than 84,000 home loans conducted by risk management firm Milliman, one missed payment on a mortgage led to an average 52-point credit score drop, while four missed payments typically translated to a collective drop of more than 98 points. A lower credit score will create major challenges to your ability to secure other loans, not to mention the best possible interest rates on them. Defaulting on your home equity financing has consequences for your other loans too – in particular, the primary mortgage on your home (unless you've paid it off). Remember, that's another lender also waiting to be repaid. You might assume that if your first mortgage is in good standing, you're still okay. However, think of it this way: You owe money to two parties. Neither is really more important to pay; they both have to get their regular payments, and if they don't, both of them have the right to your property. The home equity lender is in a tougher spot, though. If it forces foreclosure, the primary lender is entitled to recoup its outstanding balance first. 'Because [home equity] loans are usually in a second lien position behind the primary mortgage, the process is more complex and challenging for the [home equity] lender,' says Phil Crescenzo Jr., vice president, Southeast Division, Nation One Mortgage. The home equity lender has two options. It can initiate foreclosure and see how much money is left over after the primary mortgage lender is paid from the sale of the property, or it can try to buy the primary mortgage for a more direct pathway to a sale. Worthington says that lenders usually look at the available equity in the property prior to moving forward. No matter what route the home equity lender opts to take, the outcome for you, as a borrower, is the same: You're going to lose your home. And if your primary mortgage is also filed as a default – as Worthington says it typically is – it means that not one, but two, of the worst possible black marks on your credit report will follow you around for the next seven years. Many homeowners are sitting on a huge pile of home equity right now, which can offer an appealing source of cash. But accessing funds via home equity loans and HELOCs comes with a big responsibility – and risk. Defaulting on them has serious repercussions that can destroy your credit and reduce your odds of getting approved for other financing in the future – not to mention losing the roof over your head. And while they're considered second mortgages, don't let that next-in-line status fool you: Repaying them is just as essential as making your payments on your primary mortgage. Being on time with your mortgage won't save you from foreclosure if you become seriously delinquent on the home equity debt.
CBS News
10 hours ago
- Business
- CBS News
How to determine HELOC affordability in today's changing rate climate
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Before taking out a HELOC, it's important to determine whether you can actually afford this type of borrowing, both now and in the long term. lOvE/Getty Images The Federal Reserve is dealing with a delicate balancing act, trying to do what's necessary to lower inflation without wreaking havoc on the economy. In pursuit of those economic goals, the Fed has maintained the federal funds rate at its current level throughout 2025 to counteract the inflation that has plagued Americans over the past several years. While the hope is that this strategy will smooth things out in the long term, borrowers are bearing the brunt of this choice in the short term. The Fed rate impacts the interest rates on various types of loans, and today's higher-than-average Fed rate has increased the cost of borrowing. With credit card interest rates averaging around 22% and personal loans at 12%, home equity lines of credit (HELOCs) have become a lower-cost alternative. Average HELOC interest rates come in much lower at 8.14% currently after falling below 8% in early April. While that rate is more borrower-friendly, HELOCs have variable interest rates, which can make the payments unpredictable. So, before opening a HELOC, borrowers need to consider how much they can truly afford. We spoke with home lending experts on how to determine HELOC affordability in today's uncertain and changing rate climate. Compare your top home equity borrowing options online now. How to determine HELOC affordability in today's changing rate climate Any time you borrow, you need to make sure you can fulfill your repayment obligations. For HELOC borrowers who use their home as collateral, that's even more important to stave off a potential foreclosure. In that way, the HELOC risks are important to consider as the stakes are high. "Step one will be what the bank is willing to lend you. But while that's a great barometer to say, 'Okay, I'm qualified,' it doesn't necessarily mean that the individual could afford it, and that it makes sense for them. So they have to do their own calculations," says Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank. If you're a current or prospective HELOC borrower, here are some ways to find out what you can comfortably afford. Be conservative about tapping in A HELOC allows homeowners to tap their home equity to borrow funds. Considering the average home equity amount is $313,000, homeowners may have access to higher loan limits than some alternatives at better interest rates. However, because HELOC rates are variable, it's important to be conservative so you have room in your budget for any changes. "I think they should think worst-case scenario. I think it never hurts somebody to be thinking conservatively when you're talking about rates that move, let alone rates that can move every month," says Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider. To help you determine your HELOC affordability, do several exercises and calculate how your payments might change if rates change. "Whatever the interest rate is you're being offered by the lender that you've chosen to go with, I think you should increase that rate by 1% and see how much your payment changes and whether you feel comfortable with that. And then, if you want to be really conservative, increase it by 2%," adds Mayfield. Find out how affordable a HELOC could be today. Know how much you need The great thing about a HELOC is the flexibility. Like a credit card, you can access some of the funds up to your set limit, repay and use the funds again while you're in the draw period. While that's convenient, it can be a slippery slope if you're unclear on how you intend to use the HELOC or are unsure how much you need. Whether you're starting a kitchen renovation you've been putting off or consolidating high-interest debt, know how much you need and try to stick to that amount. So even if you go after a higher line of credit, you're sticking to a plan and only borrowing the home equity amount you need. "What I will always remind people of is just because you asked for, let's say, a $200,000 line of credit doesn't mean you need to spend $200,000. You don't even have to spend $2,000," says Mayfield. Decide if you can pay more than the minimum HELOCs are a unique borrowing tool in that borrowers are typically only required to pay the interest — not the principal — during the draw period. That could potentially be up to 10 years. After the draw period ends, borrowers transition to the repayment period, resulting in a significant jump in the payments, as both the principal and interest must be repaid. If you don't carefully plan for this, it could put a major strain on your budget. That's why it's key to look at your ability to pay more than the minimum when determining HELOC affordability. Paying more than the minimum can help you chip away at your balance and reduce borrowing costs. "When possible, a person can and should pay back principal," Shayowitz says. That can make HELOC repayment more manageable and save you money over the life of the loan. Plus, doing this with a HELOC can still provide a safety net. "Even if you do prepay the principal, you could always draw upon it if you need it later on in the future," adds Shayowitz. The bottom line In today's high-rate climate, a HELOC can be a welcome alternative for homeowners who need access to funds, but it's important to determine HELOC affordability as it has a variable rate that changes. We're in an uncertain rate environment, so you want to be prepared and a well-informed borrower. If a fixed-rate product would be better for you and your budget, another option to look into is a home equity loan. This type of borrowing is not as flexible as a HELOC, as it provides a one-time lump sum of money, but the fixed home equity loan interest rates provide more predictable payments. Before opening a HELOC or taking out a home equity loan, review APRs, terms and fees with various home equity lenders. Understand home equity risks when taking on this type of financing and have a plan to tackle repayment for the best results.
CBS News
11 hours ago
- Business
- CBS News
Where are HELOC rates heading in the second half of 2025?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Home equity rates could shift later this year, experts say, but it may not be when you'd expect it to happen. Getty Images The average home equity amount currently stands at $313,000, according to the March 2025 Intercontinental Exchange (ICE) Mortgage Monitor report. Homeowners who want flexible access to financing can turn to a home equity line of credit (HELOC), which leverages their existing home equity and turns it into a line of credit that can be drawn from as an affordable financing option. For more than a year, HELOC interest rates have been steadily decreasing, even reaching a two-year low at one point. However, HELOC interest rates saw a slight uptick recently and then a subsequent fall, with average HELOC rates currently sitting at 8.14%. These small swings can affect HELOC rates and, in turn, how much borrowers pay to access this type of financing. Plus, HELOC rates are variable, which means they can fluctuate even after you take one out. Because of this, current and prospective borrowers should keep tabs on where HELOC rates are going. So, as we head into June, where are HELOC rates heading in the second half of 2025? We spoke with home lending professionals to share their expertise about the current HELOC environment and what to know about where rates are going. Find out how affordable a HELOC could be for you today. Where are HELOC rates heading in the second half of 2025? The Federal Reserve has worked tirelessly to tame stubborn inflation over the last few years. That's led to the high-rate environment we're in today, which has increased the cost of borrowing across a range of products, including HELOCs. "HELOC rates move in tandem with fed funds rates. So every time the Federal Reserve cuts rates…every time they make a change, then HELOC rates will move accordingly," says Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank. The Federal Open Market Committee (FOMC) meets on June 17 and 18 to discuss monetary policy. At that time, the FOMC decides whether to keep rates the same or increase or decrease them. What happens at the June FOMC meeting will have a direct impact on HELOC rates, but a Fed rate cut may not be on the horizon. "It is highly unlikely that they will cut or increase rates in June," says Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider. The CME FedWatch tool shows close to a 95% probability that there will be no change to the federal funds rate. The other 5% shows the probability of a decrease. This may be unwelcome news, as the Fed hasn't made any changes to the federal funds rate in 2025 yet. After the May meeting, the Federal Reserve attributed its decision to persistent economic uncertainty and above-average inflation. As a result, HELOC rates likely won't see a drop in June as the Federal Reserve is projected to keep the federal funds rate the same. Whether the Federal Reserve still intends to go through with the rate cuts later in 2025, though, depends on many factors. "A lot of the different economic data really comes down to impacting inflation. And that's one of the key drivers that the Fed looks at when considering whether to increase or decrease or keep it [federal funds rate] unchanged," says Mayfield. While the Federal Reserve focuses on U.S. monetary policy, there can be a ripple effect on the global stage. "The world economy is so much more dependent upon one another compared to a hundred years ago," adds Mayfield. The Federal Reserve is cautious right now, taking a wait-and-see approach and looking at information as it unfolds. "I think we'll see one to two cuts this year…and that they would be the second half of this year," says Mayfield. "So in 2025, there has yet to be a rate cut. Interestingly to note, that the rate cuts in 2024 were in September, November, and December, so the Federal Reserve is not averse to doing these changes at the end of the year, as we saw last year," Shayowitz says. If and when the Federal Reserve cuts rates later this year, though, HELOC rates will likely follow. "If somebody took out a home equity line of credit today, and there was a 50 basis point cut in September, starting October 1st, they would get the benefit of the lower interest rate and their payments and their bill would be adjusted accordingly," says Shayowitz. Learn more about your top HELOC options online now. The bottom line A home equity line of credit gives homeowners alternative financing options to a credit card or a personal loan. Though rates on most loan products are relatively high at the moment, HELOCs still provide lower rates in comparison. Instead of close to 22% on a credit card or 12% on a personal loan, homeowners who meet the eligibility requirements may score HELOC rates around 8%. So if you have other high-interest debt to consolidate or have necessary home repairs, HELOCs can provide substantial benefits on top of flexibility right now. To find the most competitive rate, look at offers from various home equity lenders. Before doing so, be aware of HELOC risks. You can get a lower interest rate, but if you fall behind on your HELOC payments, it could eventually lead to foreclosure. The variable rate on HELOCs also means that while your payments can go down, they can also go up. You can consider a home equity loan as an alternative, which gives borrowers lump sum funding and fixed interest rates. As home equity loan interest rates are fixed, it can be easier to budget for than a HELOC. Whether you go with a HELOC or home equity loan, do your research, compare offers, and know the home equity risks with either option. Most importantly, have a plan for repayment so it can be a tool to help your finances instead of dragging them down.
Yahoo
15 hours ago
- Business
- Yahoo
HELOC rates today, June 3, 2025: Interest rates on home equity lines of credit are unchanged
HELOC interest rates were stable today, unchanged from yesterday. How hot are HELOCs? In a new analysis, Intercontinental Exchange (ICE), a mortgage data provider, said second mortgage home equity withdrawals in the first quarter of 2025 grew 22% year over year to nearly $25 billion. That's the highest first quarter volume since 2008. 'Equity levels remain historically high, and now we're seeing the cost of borrowing against that equity drop meaningfully,' Andy Walden, Head of Mortgage and Housing Market Research at ICE, said in a release. 'The monthly payment needed to withdraw $50,000 via a home equity line of credit (HELOC) has fallen by more than $100 since early 2024." Now, let's check the latest HELOC rates. Dig deeper: HELOC vs. home equity loan: Tapping your equity without refinancing According to Zillow, rates on 10-year HELOCs held steady at 6.81% today. The same rate is also available on 15- and 20-year HELOCS. VA-backed HELOCs also remained stable at 6.36%. Homeowners have a staggering amount of value tied up in their houses — more than $34 trillion at the end of 2024, according to the Federal Reserve. That's the third-largest amount of home equity on record. With mortgage rates lingering in the high 6% range, homeowners are not likely to let go of their primary mortgage anytime soon, so selling the house may not be an option. Why let go of your 5%, 4% — or even 3% mortgage? Accessing some of the value locked into your house with a use-it-as-you-need-it HELOC can be an excellent alternative. HELOC interest rates are different from primary mortgage rates. Second mortgage rates are based on an index rate plus a margin. That index is often the prime rate, which today is 7.50%. If a lender added 1% as a margin, the HELOC would have a rate of 8.50%. However, you will find reported HELOC rates are much lower than that. That's because lenders have flexibility with pricing on a second mortgage product, such as a HELOC or home equity loan. Your rate will depend on your credit score, the amount of debt you carry, and the amount of your credit line compared to the value of your home. And average national HELOC rates can include "introductory" rates that may only last for six months or one year. After that, your interest rate will become adjustable, likely beginning at a substantially higher rate. You don't have to give up your low-rate mortgage to access the equity in your home. Keep your primary mortgage and consider a second mortgage, such as a home equity line of credit. The best HELOC lenders offer low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to your credit line limit. Pull some out; pay it back. Repeat. Meanwhile, you're paying down your low-interest-rate primary mortgage like the wealth-building machine you are. Today, FourLeaf Credit Union is offering a HELOC rate of 6.49% for 12 months on lines up to $500,000. That's an introductory rate that will convert to a variable rate later. When shopping lenders, be aware of both rates. And as always, compare fees, repayment terms, and the minimum draw amount. The draw is the amount of money a lender requires you to initially take from your equity. The power of a HELOC is tapping only what you need and leaving some of your line of credit available for future needs. You don't pay interest on what you don't borrow. Rates vary so much from one lender to the next that it's hard to pin down a magic number. You may see rates from nearly 7% to as much as 18%. It really depends on your creditworthiness and how diligent a shopper you are. For homeowners with low primary mortgage rates and a chunk of equity in their house, it's probably one of the best times to get a HELOC. You don't give up that great mortgage rate, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades. Of course, you can use a HELOC for fun things too, like a vacation — if you have the discipline to pay it off promptly. A vacation is likely not worth taking on long-term debt. If you take out the full $50,000 from a line of credit on a $400,000 home, your payment may be around $395 per month with a variable interest rate beginning at 8.75%. That's for a HELOC with a 10-year draw period and a 20-year repayment period. That sounds good, but remember, it winds up being a 30-year loan. HELOCs are best if you borrow and pay back the balance in a much shorter period of time.
Yahoo
a day ago
- Business
- Yahoo
Refinancing to a 15-year mortgage: What to consider
Refinancing from a 30-year mortgage to a 15-year mortgage can save you a significant amount of money in interest and pay off your mortgage sooner. While a 15-year mortgage comes with a higher monthly payment, it also helps you build equity and eliminate mortgage debt faster. Shop around and compare rates from different lenders to find the best 15-year loan offers. When mortgage rates decline, more homeowners look to refinance, sometimes to 15-year loans. A 15-year mortgage can set you on the path to build equity faster and pay off your loan sooner, potentially for less interest — but it comes with downsides, as well. Let's break down whether refinancing to a 15-year mortgage is right for you. Before refinancing to a 15-year mortgage, consider: Have you had your current mortgage long enough to refinance? Most lenders require a certain amount of time to pass before you can refinance to a new loan — a period known as 'seasoning.' Can you afford the higher monthly payment? If you're refinancing to a 15-year loan from a 30-year loan, your monthly payment could go up — even with a lower balance overall — because you're paying back the new loan in half the time. Will you remain in your home long enough to break even? Refinancing comes with closing costs. Even if you're refinancing to a lower rate, it could take up to a few years to recoup the cost of those upfront expenses. Will a higher monthly payment get in the way of other financial goals? Will you have enough cash flow to still maintain an emergency fund, save for retirement and meet other financial milestones? How secure is your income? A shorter-term mortgage means more expensive monthly payments and a tighter repayment timeline. Could those aspects pose a problem if you were to lose your income? Is it better to simply pay more on your current mortgage? If getting free and clear of your mortgage is the main goal, you could accomplish that with extra payments toward your principal. You won't get a new interest rate or term, but you'll save yourself from applying for another loan. Learn more: Current 15-year refinance rates Lower interest rate: The interest rates on 15-year fixed loans are lower than those on 30-year mortgages. That lower rate, plus a shorter repayment period, can save you tens of thousands (or more) in interest. Build equity faster: Paying off your mortgage at a faster pace allows you to build equity faster. You can tap that equity in the future via a home equity loan, home equity line of credit (HELOC) or cash-out refinance. Potential to reduce monthly payments: If your new rate is significantly lower than the existing rate, you could have a lower monthly payment. Potential for higher monthly payment: Because 15-year loans are shorter, your monthly payment could increase. You'll need to be able to afford that on top of other obligations month to month. Closing costs: If you can't afford the closing costs of a 15-year refi upfront, you won't save as much as you hope to. Other costs: The process to refinance involves paperwork and waiting, which can be inconvenient. In addition, applying for a refinance temporarily lowers your credit score. Less money for other things: Homes are an illiquid asset, meaning you can't easily turn them into cash. Aside from that risk, if more of your budget is going to a higher 15-year payment, you might have less to contribute to a retirement plan, other investments and emergency savings, or paying down debt. If you're overextended, that can make it harder to qualify for other forms of credit, too. Refinancing is all about the numbers. Let's say our borrower took out a 30-year, $265,000 mortgage in 2020 at 3.9 percent. Fast-forward five years to today: Mortgage rates are now close to 7 percent. Could our borrower save by refinancing to a 15-year term — even at the higher rate? Balance Loan term Interest rate Monthly payment Interest paid over term Interest savings over term $265,000 30 years 3.90% $1,250 $184,971 $0 $238,351 15 years 7% $2,142 $147,275 $37,696 In this scenario, the borrower could save considerably on interest (less closing costs) by refinancing to a 15-year loan and paying about $892 more per month. If your budget has that flexibility and you're set on shedding your mortgage sooner compared to sticking with the 30-year loan, refinancing could make sense for you. Now, let's say rates decreased from 2020 rather than increased. Here's how the above example might play out: Balance Loan term Interest rate Monthly payment Interest paid over term Interest savings over term $265,000 30 years 3.90% $1,250 $184,971 $0 $238,351 15 years 3.5% $1,703 $68,328 $116,643 In this case, our borrower would still be making a higher monthly payment, but not as high as the higher-rate scenario. Our borrower would also save more than $115,000 in total interest. Learn more: How to get the best refinance rate Refinancing to a 15-year mortgage is similar to the process you completed when you took out your original mortgage. Here's what you might expect from the process: Lender shop: Don't just assume you'll get the best refinance deal with your current lender. Compare multiple options with a few different lenders to see where you'll score the best deal with a competitive rate and low closing costs. Submit financial information and paperwork: Once you've selected a lender, you'll need to submit paperwork for the loan and share your financial information. This includes things such as pay stubs, tax returns, bank account information and any debt. Get an appraisal: Once you settle on the best lender and submit all your information, you'll need to pay for an appraisal to verify the property value. Close on the loan: Once everything is in order, you'll close on the new loan and pay closings costs, if needed. Keep in mind, closing on the new loan won't happen overnight — refinancing can take just as long as a purchase mortgage. In general, it is a good idea to refinance to a 15-year loan if: You can get a lower rate than your current mortgage rate, ideally by at least a half to three quarters of a percentage point. You'll be in your home long-term. You can afford the higher monthly payment. Your credit score or income has increased since you were first approved for your loan. You have 15 (or more) years remaining on your mortgage. Should I refinance to a shorter term? If you're confident that you can comfortably afford the new monthly payments and you're planning to remain in the home long enough to recoup the closing costs, it can be a smart move. You'll pay less interest over the life of the loan, and you'll pay off your home in a shorter time. Can you refinance a 15-year adjustable mortgage to a 15-year fixed mortgage? Yes. You can refinance a 15-year adjustable-rate mortgage (or any ARM loan) to a 15-year fixed-rate mortgage. If the intro period on your adjustable-rate mortgage is about to end and you're concerned about your rate potentially adjusting higher, refinancing to a fixed-rate mortgage can bring more stability to your monthly payments. What credit score do I need when refinancing from a 30-year to a 15-year mortgage? Many lenders offering conventional mortgages require a minimum 620 credit score, but to get the most competitive rate, you'll want a credit score well above this minimum. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
