A single-family housing refinance loan enables homeowners to replace their current mortgage with a new loan secured on a one-family residential property. This refinancing can help reduce monthly payments by securing a lower interest rate, shorten or extend the loan term, or allow homeowners to access cash by borrowing against their accumulated home equity.
The refinance process involves applying for a new loan—either with your current lender or a different one—that pays off your existing mortgage. After closing the refinance, you begin making payments on the new loan under updated terms.
To qualify, lenders typically evaluate your credit score, income stability, debt-to-income ratio, and home equity (usually requiring at least 20% equity). The refinancing application also includes a home appraisal to determine current market value.
Common reasons for refinancing include:
- Lowering your interest rate to reduce monthly payments and overall interest costs.
- Changing your loan term to pay off your mortgage faster or lower monthly payments.
- Cash-out refinancing, which lets you borrow more than your current mortgage balance and receive the difference in cash for home improvements, debt consolidation, or other expenses.
Homeowners should carefully consider closing costs, which may range from 2% to 5% of the loan amount, and calculate the break-even point when savings offset these costs.
For more detailed guidance, see our articles on Mortgage Refinance, Cash-Out Refinance, and Home Equity Line of Credit (HELOC). Additionally, the CFPB explains the refinancing process in detail at their official website.
Understanding the terms and costs involved in a single-family housing refinance loan can help homeowners make informed decisions that align with their financial goals.