What is Refinance Loans?

What is Refinance Loans?

A refinance loan allows you to replace your existing mortgage with a new one, typically offering more favorable terms. When you opt for a refinance, your new lender pays off your original mortgage using the new loan. Essentially, you are refinancing or reevaluating the financing of your home with a different loan.

Many homeowners choose to refinance when interest rates have significantly dropped since their initial home purchase. By doing so, they can secure a new mortgage with lower interest rates, potentially reducing the total interest paid over the life of the loan.

Another reason people consider refinancing is to access the equity built in their homes. If you have substantial equity due to years of mortgage payments or an increase in your home’s value, you may be able to withdraw cash during the refinance process. This cash can be used for home renovations, consolidating higher-interest debt, or saving for important future expenses like college tuition.

At Fairway, our team of mortgage experts can guide you through the refinance process, exploring your options and helping you make an informed decision that aligns with your financial goals.

Exploring Refinance Loan Benefits

If you’re considering refinancing your mortgage, Fairway offers several advantages that could benefit you in your financial journey. Refinancing may be the right choice if your home’s value has experienced a significant increase or if current interest rates are substantially lower than when you initially purchased your home. Here are some highlights of what a refinance with Fairway can offer:

  • Save money by shortening your loan’s term: Through a refinance, you have the opportunity to shorten the term of your loan, allowing you to pay off your mortgage sooner and potentially save on interest expenses.
  • Lower your interest rate and monthly payments: By refinancing, you can take advantage of lower interest rates, which may result in reduced monthly mortgage payments. This can provide valuable financial relief and increase your monthly cash flow.
  • Switch from an adjustable-rate mortgage to a fixed-rate mortgage: If you currently have an adjustable-rate mortgage (ARM), refinancing allows you to convert it into a fixed-rate mortgage. This offers stability and protects you from potential interest rate fluctuations in the future.
  • Simplify and potentially save with a single loan: Refinancing gives you the option to combine a first and second lien into a single loan. This not only streamlines your financial obligations but could also lead to potential cost savings.
  • Consolidate higher-interest debt into a single loan: Refinancing allows you to consolidate debt from credit cards or subordinate loans with higher interest rates into one loan. This consolidation could result in lower monthly payments and potentially reduce your overall interest costs.
  • Access your home equity: Through a refinance, you can tap into your home equity and convert it into cash. This can be used for various purposes, such as home improvements, educational expenses, or other financial needs.


At Fairway, our experienced mortgage professionals are here to guide you through the refinancing process. We’ll help you explore your options, assess your unique financial situation, and find the refinance solution that best aligns with your goals.

Refinance Loan FAQs

How much does it cost to refinance a mortgage?
The cost to refinance your loan depends on several factors. Many refinance loan programs require a new appraisal on the home. That cost can range from $400-$750 for an average-sized home, but it may not always be required under all refinance loan programs. There are also generally closing costs associated with your new refinanced home loan. Sometimes those closing costs, which can vary widely depending on the size and type of property, must come out of pocket, and other times, they can be rolled into the financing of the new home loan instead of coming out of your pocket when the new refinanced loan closes. It is important to discuss the costs, terms and conditions associated with a refinance loan with your Fairway mortgage advisor.

When should I refinance my mortgage?
The short answer here is that you can refinance anytime when it benefits you as a borrower, as long as you have at least a six-month on-time payment history on your current home mortgage loan. Maybe that means when mortgage rates have decreased considerably. Maybe that means when you have built up a significant equity stake in your home, when a refi would serve to either shorten your loan term or to tap that equity by taking cash out at the time of refinancing. The answer to this question is different for each individual client. It is important to discuss your specific financial situation and goals with your Fairway mortgage advisor when considering a refi.

Can I refinance if I have an FHA loan?

Yes! You may have several refinance options if you currently have an FHA loan.

  • An FHA Streamline Refinance is the term for when a borrower refinances from one FHA loan into another FHA loan. Since you have already been through the FHA loan process for your initial home loan, this streamlined refinance process means that you will be required to fill out less paperwork for your refinanced home mortgage loan. An FHA Streamline Refinance allows your new lender to use your existing credit and appraisal data from your initial home mortgage loan to approve the new refinanced home loan. So, if mortgage rates have decreased significantly since you bought your home, you may be in for smaller monthly payments with an FHA Streamline Refinance loan. You may also use an FHA Streamline Refinance loan to refinance out of an adjustable-rate home mortgage loan and into a fixed-rate loan product. The FHA loan rules require there to be a tangible benefit for the borrower when refinancing with an FHA Streamline, and converting from adjustable-rate to fixed-rate does qualify.
  • You may also choose to refinance out of your FHA loan altogether and into a conventional home mortgage loan product. This may be beneficial if your credit score has improved significantly since they took out their FHA loan, because your rate on a conventional mortgage loan with your improved credit score may be better than the rate you have on your current FHA mortgage loan and better than the rate that you could get in an FHA Streamline Refinance situation. Many people also choose to refinance from their FHA loan into a conventional home mortgage loan as they approach 20-22% equity in their home. As an example, if you put down a smaller down payment (less than 10%) when you purchased your home with an FHA loan, then you know that the mortgage insurance payment that is part of your monthly mortgage payment is going to be there for the life of your FHA loan. But with a conventional mortgage loan, mortgage insurance usually is no longer required after 22% of the loan is paid off. So, as you get closer and closer to a 20-22% equity stake in your home after making monthly mortgage payments for several years, then refinancing from that FHA home mortgage loan and into a conventional mortgage loan may save you some money on your monthly payment as well.


How soon can I refinance my FHA loan into a conventional loan?

You are required to have at least a six-month history of on-time monthly mortgage payments before you can refinance any home mortgage loan. However, it may be advantageous to wait even longer than that before refinancing your FHA home mortgage loan, for the reasons discussed in the previous answer. As always, it is important to talk your refinance options over with your Fairway mortgage advisor to make sure that you are getting the most benefit from your new home loan, because each individual’s financial situation, credit situation and goals may vary.


Understanding Home Equity Loans and Refinance

It’s not uncommon to encounter some confusion when it comes to the terminology surrounding home loans. The terms “home equity loan” and “refinance” are sometimes used interchangeably, leading to misunderstandings. Let’s clarify their relationship.

In general, all refinance loans consider the amount of equity a borrower has in their home at the time of refinancing. Whether you’re exploring a rate-and-term refinance or a cash-out refinance, having more equity in your home during the refinance process can bring various advantages in your new mortgage loan. In this broader sense, you can indeed consider “home equity loan” and “refinance” as synonymous terms.

However, it’s important to note that people sometimes use the term “home equity loan” specifically when referring to a cash-out refinance. This distinction arises because, in a cash-out refinance, the funds received by the borrower at closing are derived from the equity they have already built in their home over time by making payments on their initial home loan.

We hope this clears up some confusion. However, if you have any questions about rate-and-term refinancing or cash-out refinancing, we encourage you to speak with your Fairway mortgage advisor. They will provide personalized guidance based on your specific situation and goals, ensuring that you make informed decisions throughout the refinancing process.