Overview

• Refinancing a mortgage means paying off an existing loan and replacing it with a new one.

The requirements:

• Documentation verifying finances, income and employment
• Credit score of at least 620
• Debt-to-income ratio between 40%-50%
• At least 20% equity in home
• Have to carry private mortgage insurance (PMI)

The benefits:

• Get a lower mortgage rate and reduce interest costs.
• Convert an adjustable rate mortgage to a secure, fixed-rate mortgage.
• Consolidate your first and second mortgages into a mortgage with a lower rate.
• Pay off installment debts and credit cards.

Right for your situation if:

• If you can reduce your current interest rate by 0.75% to 1% or higher
• You plan to stay in the home for a while