Home > Mortgages > How Much Can I Refinance My House For?

Comments 0 Comments

Refinancing can shave years off your loan and help you pay off your home faster. When you refinance your home, your loan amount can be whatever you choose it to be. It can be a lower amount than what you currently owe on your home, which would require bringing in cash to close escrow. Or it can be equal to your loan amount where cash to close would still be needed, or it could be high enough to roll any associated closing costs into the loan amount, subsequently financing those fees over the term of the loan.

Here’s a basic snapshot of how each option works.

Paying Down Your Principal Balance

Here is how to aggressively pay off your home faster — write a check and pay down your principal. Moving to a shorter-term debt structure can very easily reduce your interest expense and provide an opportunity to substantially reduce the cost of homeownership. Paying down your principal balance will mean bringing in cash and any associated closing costs based on your interest rate.

Let’s say you have a loan of $420,000 on a 30-year fixed rate of 4.375%. You’re refinancing a new loan and you can pay your loan down to $400,000 and get an interest rate at 3.625%. Let’s say your closing costs are $1,500 and your impound account monies are $2,000. Let’s say the mortgage payment on the old loan you’re paying off was $2,500 per month. The total cash to close you would need would be $26,000, which is the difference in principal, the $1,500 in closing costs, the $2,000 for the impound account, and additional mortgage payment of $2,500 (estimated payoff added to current principal) as the lender will need to obtain payoff from the lender being refinanced.

New Loan Equal to Principal Balance

This one is a biggie. By keeping your loan equal to the amount of current principal balance you’re continuing to chip away at the debt over time in a cost-favorable way. The new lender financing your home would have to set their new loan amount equal to your exact current principal, which means closing costs, any impound account monies and payoff/prepaid interest would be due at close of escrow, requiring cash.

Rolling Fees In

This is the most common approach because the fees rolled in results in a payment change of just a few dollars per month. For many, that can be a lot easier than writing a check in cold hard cash. Your new loan amount is reflective of paying off your existing note, interest, fees (if applicable) and accounting for an escrow account (if applicable). Rolling fees into the loan can help keep your cash liquid while at the same time meeting your payment and cash flow objectives of the refinance.

If you’re looking to refinance your house, you can begin by checking your credit reports for any errors that could hinder your ability to get a new loan. (Remember, a good credit score generally entitles you to better rates on a mortgage.) If you find any, you’ll want to dispute your credit report errors. You can get your free credit reports at AnnualCreditReports.com, and you can monitor your credit scores by getting two free credit scores at Credit.com.

Next, you’ll want to talk to an experienced mortgage lender (full disclosure: I am one). They can walk you through the cost benefits and options available so your goals are in alignment with your liabilities.

More on Mortgages & Homebuying:

Image: Phillip Spears

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team