Mortgage refinancing in Orange County, with a clear break-even

Good reasons to refinance

Refinancing is worth considering when it clearly improves your situation. Common reasons include:

• Lower your interest rate or payment, when current rates are meaningfully lower than your existing rate
• Shorten your term, for example from 30 years to 15, to pay off your home sooner and pay less interest over time
• Switch from an adjustable rate to a fixed rate for a predictable payment
• Remove mortgage insurance once you have enough equity
• Take cash out for a remodel, debt consolidation or other goals
• Pay for repairs or a remodel by rolling the costs into your new loan
• Remove a co-borrower after a divorce or other life change

Refinance options

As an independent broker, we compare refinance programs from many lenders, so you are not limited to what one bank offers. Here are the main choices, in plain English.

Choose your new loan term

• 30-year fixed. The most common choice. Your rate and principal-and-interest payment stay the same for the life of the loan, and spreading it over 30 years keeps the monthly payment lower.
• 15-year and other fixed terms. A shorter term, such as 15, 20 or 25 years, usually raises the monthly payment but cuts the total interest you pay and gets your home paid off sooner. Some lenders also offer custom terms, so you can keep your current payoff date instead of starting over at 30 years.
• Adjustable-rate mortgage (ARM). The rate is fixed for an initial period, often 5, 7 or 10 years, and then adjusts on a set schedule, so your payment can go up or down. An ARM can make sense if you expect to sell or refinance before the fixed period ends. We walk through the caps and worst-case payment before you choose.

Rate-and-term refinance

Replaces your loan to change the interest rate, the term, or both, without taking cash out. This is the most common way to lower a payment or switch to a fixed rate.

Cash-out refinance

Replaces your loan with a larger one and pays you the difference in cash, which you can use for renovations, paying off higher-interest debt, tuition or other goals. If your current rate is much lower than today's rates, a HELOC or home equity loan may cost less, because it leaves your first mortgage untouched. Compare the options on our home equity page.

Refinancing any loan type: conventional, FHA, VA and jumbo

Whatever kind of loan you have now, you can usually refinance into the same type or a different one. For example, homeowners sometimes move from an FHA loan to a conventional loan to drop FHA mortgage insurance once they have enough equity. Jumbo refinances cover loan amounts above the conforming limit, which is common with Orange County home values.

If you have an FHA or VA loan, FHA Streamline and VA Interest Rate Reduction Refinance Loans (IRRRLs) may let you refinance to a lower rate with less paperwork, and sometimes without a new appraisal. You must meet program rules, including a minimum time on your current loan and a clear benefit to you.

Self-employed and non-traditional income

If you own a business, work on 1099s or your tax returns show a lower income after write-offs, a traditional refinance can be hard to qualify for. Bank statement loans use your business or personal deposits instead of tax returns, 1099 loans use your 1099 income, and other non-QM (non-qualified mortgage) programs can work for retirees with significant assets or borrowers with a recent credit event. These programs often cost more than conventional loans, so we only recommend them when they clearly fit.

Investment property and DSCR refinances

You can refinance a rental home or small multi-unit property for a lower rate, a different term or cash out for your next purchase. A DSCR loan (debt service coverage ratio) qualifies mainly on the property's rental income compared with its payment, rather than your personal income, which can help investors with several properties. Investment property loans have stricter guidelines than loans on a home you live in.

Renovation refinance

A renovation refinance lets you borrow against what your home will be worth after the work is done and roll the repair or remodel costs into your new mortgage. It is one loan and one payment, instead of a first mortgage plus a separate construction or personal loan. Funds are usually paid out to your contractor in stages as work is completed. If you only need part of your equity, a HELOC may be simpler.

HELOC or home equity loan instead

If you like your current rate and just need access to cash, you may not need to refinance at all. A HELOC or home equity loan sits behind your existing mortgage, so your first loan stays untouched. See how they compare on our home equity page.

Reverse mortgage refinance (62+)

Homeowners 62 and older can use a reverse mortgage to pay off an existing mortgage and eliminate the required monthly mortgage payment, while still paying taxes, insurance and upkeep. Learn how it works in our reverse mortgage guide.

Know your break-even point

Refinancing has closing costs, so the key question is how long it takes for your monthly savings to cover them. If you plan to stay in the home well past the break-even point, a refinance may pay off. If you might move sooner, it may not.

We also look at the bigger picture: a lower payment over a new 30-year term can still mean more total interest, so we compare the total cost of each option, not just the monthly payment.

What you'll need

To get started, it helps to have:

• Your most recent mortgage statement
• Recent pay stubs and W-2s, or tax returns, bank statements or 1099s if you are self-employed
• Recent bank and retirement account statements
• Your homeowners insurance information
• For a rental property, current leases or rent information

Not sure you have everything? We'll give you a simple checklist based on your loan.