Refinance Your Mortgage in Florida

Property values have risen by a shocking 66.3% in the past five years, and the market shows no sign of stopping. As the appraised value of a home rises once a year, your property taxes will also rise, which can be difficult for those on a fixed budget. Saving money on your Florida mortgage any way you can will ensure you have enough funds to cover higher taxes in the future.

Many Florida homeowners were shocked to learn that their home insurance premiums rose by up to 40% last year due to more frequent flooding—and these high costs are not expected to go down any time soon. Reducing your mortgage rate through a refinance ensures you will have extra money available to weather any financial (or literal) storm.

With dropping mortgage refinance rates and rising costs elsewhere in the market, cutting your monthly payments helps you enjoy more savings in the bank and a stronger financial standing.

Getting a Florida mortgage refinance is very similar to applying for a new home loan, with many of the same qualifications. In both cases, the borrower should gather financial documentation, apply, and wait for approval the the underwriter reviews the financial profile and determines your ability to pay back the loan.

However, most lenders require a better borrowing profile, including a higher credit score, for mortgage refinance than for standard mortgages. There may also be significant closing costs due to a more intensive origination process.

But without the need for a down payment, plus the promise of a lower monthly payment, many Florida homeowners still find that refinancing is worth it. Below, we’ll walk through the process of applying for a mortgage refinance for those with an existing home loan.

To get started, choose what type of mortgage product you would like to pursue. There are typically two different loan options to choose from.

With a rate-and-term refinance, you can change your interest rate and, in some cases, your loan term. You will close out the original mortgage and take out a new loan that covers only the amount you still owe, typically at a lower interest rate. You may also choose to take out a longer or shorter loan. For example, lengthening the term of your loan can lower your monthly payment. 

A cash-out refinance allows you to use your home equity to receive a lump-sum payment. This closes the old mortgage and opens a new, larger mortgage. You would then receive the difference in cash. Cash-out refinancing is a great option if you have owned your home for a long time and would like to use your equity for other things, such as home remodeling or large purchases.

Once you’ve selected what type of refinance is best for you, compare multiple lenders and what they offer. When comparing, examine their Florida refinance rates, what their loan requirements are, and their customer satisfaction ratings.

You may also want to check if they require private mortgage insurance for mortgage refinance, what credit score they require, or find out if they offer a rate lock period. By comparing multiple lenders, you can help ensure you’ll get the best service and loan terms possible for your new loan.

Next, it’s time to apply. To do this, gather your financial documentation, such as tax returns, account statements, and pay stubs. Your lender will use this information, in combination with your credit score, debt-to-income ratio, and overall income to decide whether to approve your application.

Once your loan has been approved, decide whether you would like to use a rate lock or a floating rate. A rate lock has a lock period of about 15-60 days and ensures you will get the exact interest rate advertised when you were approved. 

With a floating rate, the actual rate of your loan may differ slightly when the closing process is complete. If possible, opt for a brief rate lock to ensure you’re not surprised should the market change quickly during your approval process.

Now the underwriting process begins. After your application has been approved, an underwriter will verify your financial documentation and order a new home appraisal to ensure your home is worth the mortgage amount you requested. 

Appraisal is a key element of mortgage refinance, regardless of the type of mortgage or refinance you get. For cash-out refinancing, the appraisal assesses how much money you can receive based on your old loan versus your home’s current worth. When trying to secure a lower monthly payment, your home’s current value will determine whether you have to pay PMI (private mortgage insurance).

Once the appraisal is finished, it’s time to close on the loan. As you did when you first purchased your property, you will choose a closing date and arrive to sign the paperwork. 

While you won’t need to make a down payment, you will need to pay closing costs. There will also be some lender fees, and you may pay discount points if you want to reduce your interest rate further.

While you won’t pay a down payment to refinance, you will still need to foot some costs during the process. Typically, you can expect to pay between 2% and 5% of the total loan amount through various fees when you close on your loan. For example, if you refinance a $350,000 home, you can expect to pay up to $17,500 in closing costs.

However, most Florida homeowners do not pay that much to refinance. The average closing cost in Florida, with taxes included, is around $5,821.