Mortgage rates change, and so do your financial goals. Whether you want to lower your monthly payment, pay off your home faster, or tap into your home’s equity, refinancing your mortgage can be a powerful financial move — when done strategically.
At Lexford Financial, we help homeowners simplify that process and find better terms, lower rates, and smarter loan options. Here’s everything you need to know before you refinance.
🏠 What Is a Mortgage Refinance?
Refinancing means replacing your existing mortgage with a new one — usually to get a better rate, change your term, or adjust your loan type.
Your new mortgage pays off the old one, and you begin making payments under the new terms.
Example:
Let’s say you bought your home for $200,000 and took out a $160,000 loan five years ago. If rates have dropped since then, refinancing could help you reduce your monthly payments or save thousands in interest over the life of your loan.
Why Refinance Your Mortgage?
Homeowners refinance for a variety of reasons. Here are the most common — and smart — ones.
1. Lower Your Monthly Payment
If rates have dropped or your credit has improved, you may qualify for a lower interest rate, which reduces your monthly payment.
Example:
- $200,000 mortgage at 5% = $1,074/month (30-year fixed)
- Refinanced at 3% = $843/month
That’s a savings of $231 per month — or nearly $2,800 per year.
You can also lower your payment by extending your loan term (for example, refinancing from a 15-year to a 30-year mortgage).
2. Reduce Your Interest Rate
Even a 1% drop in your interest rate can save you tens of thousands of dollars over time. Refinancing helps lock in a lower rate, especially if market conditions or your credit score have improved.
3. Pay Off Your Loan Faster
Switching from a 30-year to a 15-year term lets you own your home sooner and cut interest costs dramatically.
You’ll make higher monthly payments, but more of each payment goes toward your principal instead of interest.
4. Change Your Loan Type
If you started with an FHA loan, you may be paying for mortgage insurance premiums (MIP). Once you reach 20% equity, refinancing into a conventional loan can eliminate those extra costs.
5. Switch Between Fixed and Adjustable Rates
You can refinance from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage for long-term stability, or vice versa if you plan to sell soon and want to take advantage of short-term rate savings.
6. Cash Out Your Home Equity
A cash-out refinance lets you convert your built-up home equity into cash.
Example: If your home is worth $300,000 and you owe $200,000, you could refinance for $240,000 and receive $40,000 in cash — perfect for renovations, debt consolidation, or major expenses.
💵 How Much Does It Cost to Refinance?
Just like your original mortgage, refinancing comes with closing costs — typically 2% to 5% of your loan amount.
Here’s a breakdown of what you might see:
| Fee Type | Description |
|---|---|
| Loan Origination Fee | Charged by the lender to process your new mortgage. |
| Appraisal Fee | Covers the cost of determining your home’s market value. |
| Title Insurance | Protects against claims or liens on your property. |
| Credit Report Fee | Pays for pulling your updated credit report. |
| Prepaid Interest | Interest due between closing and your first payment. |
| Recording Fee | State or county fee to record your new mortgage. |
| Mortgage Points (Optional) | Optional fees you can pay to lower your interest rate. |
💡 Pro Tip: Many lenders (including Lexford) can roll these costs into your loan or offer lender credits to offset them.
How to Refinance a Mortgage: Step by Step
Refinancing doesn’t have to be complicated. Follow these simple steps:
1. Set Your Financial Goal
Decide what you want to achieve — lower your rate, reduce your payment, access cash, or change your term.
Knowing your goal helps you choose the right refinance strategy.
2. Get Pre-Approved
Start your refinance with Lexford Financial’s online pre-approval to see real rates and loan options tailored to your profile — in just minutes.
3. Review Your Home Value and Equity
Your home’s current value determines how much you can refinance. The more equity you have, the better your terms will be.
4. Check Your Credit and DTI Ratio
Your credit score and debt-to-income ratio (DTI) are key. Aim for a DTI under 50% and improve your score by paying bills on time, reducing debt, and correcting any errors on your credit report.
5. Compare Offers and Choose a Lender
Request multiple quotes to find the best rate and closing cost combination. Lexford’s platform lets you compare rates from top lenders in one place.
6. Appraisal and Underwriting
Your lender will order an appraisal and verify your financial details to confirm eligibility.
7. Review the Loan Estimate
Before closing, you’ll receive a Loan Estimate and Closing Disclosure detailing all terms, costs, and payments.
8. Close and Start Saving
Sign your final documents, pay any remaining closing costs, and start making payments on your new loan. Congratulations — you’ve refinanced successfully! 🎉
⚠️ Risks of Refinancing
While refinancing offers major benefits, be aware of these potential downsides:
- Closing Costs: You’ll pay new fees that may take time to recoup.
- Prepayment Penalties: Rare, but some lenders charge a fee if you pay off your old mortgage early.
- Reduced Tax Deductions: A lower interest rate means you’ll deduct less mortgage interest at tax time.
Always calculate your break-even point — how long it takes to recover the cost of refinancing through savings.
Refinance vs. Cash-Out Refinance
| Type | Description | You Get Cash? |
|---|---|---|
| Rate-and-Term Refinance | Replace your existing loan with better terms or a lower rate. | ❌ No |
| Cash-Out Refinance | Refinance for more than you owe and take the difference in cash. | ✅ Yes |
Example: If you owe $150,000 on your home and refinance for $200,000, you’ll receive $50,000 in cash (minus closing costs).
Cash-out refinances are great for home improvements or consolidating high-interest debt — but remember, you’re borrowing more, so evaluate your long-term goals carefully.
🧭 Get Expert Help from Lexford Financial
Refinancing doesn’t have to be overwhelming.
At Lexford Financial, we combine smart technology with expert mortgage advisors to help you refinance faster, easier, and more confidently.
✅ Compare real rates from trusted lenders
✅ Get pre-approved online in minutes
✅ Access expert guidance every step of the way