Do You Need Money Down To Refinance

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Do You Need Money Down To Refinance
Do You Need Money Down To Refinance

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Do You Need Money Down To Refinance

Do You Need Money Down To Refinance

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Do You Need Money Down To Refinance

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Refinancing your mortgage is essentially applying for a new home loan—with one big exception: You rarely have to pay a down payment (like you did when you got your original mortgage). You’re not completely off the hook, though: Refinancing still involves some costs, so you’ll likely need to provide cash when you close. How much money depends largely on the type of refinance.

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More often than not, you don’t need to put any money down to refinance your mortgage. In a typical term refinance, which lowers your interest rate and payments and/or shortens your loan term, lenders typically look for a loan-to-value (LTV) ratio of 80% or lower and the borrower’s creditworthiness—as opposed to providing money up front.

A loan-to-value ratio is the amount of money you want to borrow—also known as the principal amount of the loan—divided by the value, or value, of the property being financed.

Other factors that contribute to the lender’s decision include the amount of equity in your home, your credit score and whether your existing mortgage is in good standing with no late or missing payments.

Do You Need Money Down To Refinance

A cash-out refinance involves bringing money to the table, similar to the down payment you paid when you originally purchased the home. As part of the refinancing process, you make a one-time payment for the principal amount you owe on the home loan. Making this payment reduces the total amount owed, and as a result, your financed mortgage will have a smaller principal balance.

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This approach to refinancing can make sense if you want to reduce your current expenses. For example, a cash-out refinance can help lower your monthly payments even if you shorten the loan term (usually the shorter the term, the higher your monthly payments). It can also help you get a lower interest rate and get your LTV to the point where you can get rid of private mortgage insurance (PMI). It may also make sense to use this approach to refinancing if you’ve recently built up a significant amount of cash that you can use to reduce your overall debt load.

Cash-out refinancing is basically the opposite of cash-out refinancing, where you replace your current mortgage with a larger mortgage, and put the extra amount to immediate use. The main distinction: at the time of refinancing of consideration

Although in most cases a down payment is not necessary, refinancing comes with closing costs. Average closing costs for a refinance are about $5,000, according to Freddie Mac, and can include:

Some of these costs may be waived or rollover your loan in a no-closing-cost refinance to avoid paying the costs up front. The downside to refinancing with no closing costs is that you’ll pay interest on a higher loan amount, and as a result, you could end up paying a lot more over time. However, if you won’t be in the home long, a no-closing-cost refinance can be a good choice.

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You can also try to negotiate your closing costs. If you have received a loan from the lender in the past or are a customer in good standing, you may be able to convince them to waive some of the costs. In addition, there are some costs, such as an assessment or survey, that may not be necessary if you completed them recently.

However you choose to pay for closing costs, be sure to consider when you’ll break even to determine if the cost is worth the savings you’ll realize. You can use the refinance calculator at to see how many months it will take to pay back your closing costs. If you don’t plan on staying in your home for long or close to paying off the mortgage, starting financing may not be worth it.

Another way to reduce refinancing costs is to get the lowest interest rate possible. Although mortgage rates have risen over the past year, there are steps you can take to get the best interest rate possible in the current environment.

Do You Need Money Down To Refinance

Even with rising rates, refinancing can be worth the cost for many homeowners. It is important to crunch the numbers to see what your expenses are and then estimate how long you will be at home as well as how long it will take you to break even.

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Although they usually don’t require a down payment, refinancing requires you to come up with cash—usually to cover minor closing costs. The total amount you will spend on refinancing often depends on the type of loan you are looking for.

Standard rate and long-term financing will incur closing costs that can average $5,000. A paid-up refinance doesn’t require a down payment, but you’ll still have to pay closing costs. A cash-out refinance involves the largest amount of

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