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Mortgage refinancing is the process of negotiating a new mortgage contract while continuing to live in your existing home. Instead of moving, you have a closing with a lender that potentially grants you a lower rate or a longer or shorter term and could give you cash back as credit for the equity you’ve already paid into your former mortgage.
Like a new home purchase, administrative costs could range from 2% to 6% of your new loan amount. With these expenses, refinancing is usually best done when you plan to stay in your existing home for several years to recoup your closing costs.
Because refinancing your mortgage could be a smart financial move—or a costly one—we reviewed 18 mortgage refinance companies to find eight that are the best fit based on different circumstances. Before deciding to refinance, review our best mortgage refinance companies closely to learn the finer points and hidden gems that can help you make the best refinance decision for you with the right lender.
Best Mortgage Refinance Companies of 2022
- Best Overall: Quicken Loans (Rocket Mortgage)
- Best All-in-One Service: Nationwide Home Loans
- Best for Customer Service: AmeriSave Mortgage
- Best Online Lender: LenderFi
- Best Bank: Bank of America
- Best Credit Union: Alliant Credit Union
- Best for Fees: Better.com
- Best for Veterans: Navy Federal Credit Union
What Is Mortgage Refinancing?
Mortgage refinancing occurs when a homeowner applies to a lender for a new mortgage on their existing property. At the closing for the refinance, the new lender pays off the debt owed to the former lender. The homeowner now has a new mortgage note with the new lender.
There are two types of mortgage refinances. One is called cash-out, the other rate-and-term. If the homeowner qualifies for a cash-out refinance, the new lender gives them cash back at their closing based on the equity they had already built up in the former mortgage balance. A rate-and-term refinance allows the homeowner to get into a new mortgage with a lower rate and a new term length than their previous contract.
Is Mortgage Refinancing a Good Idea?
Mortgage refinancing is a good idea under many circumstances, such as if you have an adjustable-rate mortgage and a lender allows you to move into a fixed rate so that you have a predictable principal and interest payment for the life of the loan. In addition to predictable payment, you’ll most likely refinance if it lowers your monthly payment, too.
Another reason is that you may want to pay off your home faster. If so, a refinance could move you from a mortgage that has, say, 24 years remaining on its term, into a new 15-year mortgage. With all of these upsides to a refinance, it’s considered a good financial move to refinance your home to either get rid of a HELOC you may have or, if you specifically do a cash-out refinance, you can use that cash from your equity to fund a home improvement project.
What Costs Are Involved in Refinancing My Mortgage?
The costs involved in refinancing your mortgage typically include application, origination, and processing fees, as well as an appraisal to verify the value of your home, which affects the size of your new mortgage and the potential amount of cash you can take out. These fees are either paid out of pocket or you may roll them into your new loan. If they are rolled into your new loan, these fees will be deducted from the cash-out you were expecting.
It’s important to compare refinance lenders because they set most of their own fees, so it is worth your time to shop around. Some lenders don’t charge application, lender, and origination fees, so don’t accept them as a standard cost everywhere you go.
How We Chose the Best Mortgage Refinancing Companies
We reviewed 18 refinance companies to select these best seven. We made sure their rates were competitive, and we preferred lenders with lower fees than the competition. Except in a few cases, we favored lenders who were licensed nationwide. The lenders we awarded as best-in-class in a category but don’t lend nationwide made our list because they had an offering that really set the bar high.
We wanted our best refinance lenders to offer a variety of term lengths, fixed and variable rate choices, accepted lower credit score minimums, and financed several types of homes. To be determined as one of the best, they need to be inclusive of homeowners with different financial situations and home types. As always, customer service ratings, convenience, and reputation needed to be stronger than the competition to win one of our categories.