Refinance Your Mortgage in Colorado

Are you considering refinancing your mortgage to reduce your monthly payments and want to know if it’s worth It?

Let’s discuss the pros and cons of refinancing for Colorado Homeowners and examine local rates so you can make the best decision.

Refinancing is the process of replacing a current mortgage with a new mortgage and can be a great way to take advantage of a lower interest rate.

This means more affordable monthly payments and less interest paid over the loan’s life. Refinancing may also help you qualify for tax advantages.

So, when should you refinance your loan for tax deductions to have more money and enjoy everything Colorado has to offer?

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Benefits of Refinancing in Colorado

Given Current mortgage rates in Colorado, now is a great time to refinance your mortgage. Current mortgage rates for 30-year and 15-year fixed loans have seen a decline recently, making it a favorable time for refinancing compared to the national average. These rates fluctuate weekly, so price shopping can lock you into an advantageous refinancing interest rate.

The housing market in Colorado continues to increase in demand, with a 3.4% increase year over year. An increase in appraised values causes an increase in property taxes and insurance, requiring homeowners to stretch their household budget even more. Insurance costs in Colorado exceed the national average, with an average annual policy costing $3,320 compared to the nation’s average of $2,243.

Colorado homeowners with an adjustable-rate mortgage (ARM) may also choose to refinance into a fixed-rate loan for more predictability. With adjustable mortgage interest rates, monthly payments could become less affordable. You can use our F5 Mortgage calculator to compare rates and find the most suitable solution for you.

Another benefit of refinancing your Colorado mortgage is access to cash. With record-high interest rates over the past few years, many Colorado homeowners have built more equity into their existing homes and were able to lower their PMI (Private Mortgage Insurance).

A cash-out refinance allows you to refinance while also cashing out against your home’s equity to cover home improvements such as repairs or renovations. Saving money on your Colorado mortgage through a refinance can help you lower your monthly payment to cover these unexpected costs or to build an emergency fund.

Benefits of Refinancing in Colorado

Financial experts predict that the Federal Reserve will continue decreasing interest rates throughout 2024 to help support the housing market. A reduction in interest rates in Colorado will likely bring a new wave of buyers and borrowers, especially in high-demand cities like Colorado Springs, Boulder, Fort Collins, and Denver.

Now is the time to begin researching your ideal mortgage lender. Locking in a competitive refinance rate is the first step toward achieving your financial needs for this coming year.

Why Refinance in Colorado with F5 Mortgage?

Refinancing your Colorado mortgage can help you qualify for a more competitive interest rate, which means better mortgage payments. Choosing F5 Mortgage from the variety of mortgage lenders in Colorado provides the following benefits:

Competitive Interest Rates

F5 Mortgage aims to help you find the most competitive refinance rates in Colorado.

Customizable Loan Options

No two buyers’ or homeowners’ finance needs are the same, so we offer customizable loan terms.

Team of Expert Consultants

As a full-service company, F5 Mortgage helps you throughout the whole process.

Fast Pre-Qualification Process

Our team speeds up the pre-qualification process with a convenient online system. You can also work with us via phone.

Full-Service Lending Company

We connect Colorado homeowners to various mortgage refinance programs, including adjustable and fixed rates. We also offer FHA, VA & conventional loans.

Easy Access to Equity

Cash-out home equity refinance loans are a great choice for Colorado homeowners who want to cash out some of their home’s equity.

How Does the Refinancing Process Work in Colorado?

Refinancing a mortgage in Colorado is similar to taking out a new home loan. Borrowers will have to meet many of the same loan eligibility qualifications. The application requirements may be slightly stricter than those of a traditional home loan. However, specific loan terms and requirements vary, depending on the mortgage types and the borrower’s individual circumstances.

F5 helps Colorado homeowners choose the right refinance loan based on eligibility and loan requirements. In addition to choosing the right refinance mortgage, borrowers must submit a loan application with supporting financial documentation. Borrowers may need a higher credit score and low debt-to-income ratio to qualify for a lower rate.

Below, we’ll walk you through the process of applying for a mortgage refinance in Colorado.

The new loan will be funded, and the proceeds will be used to pay off your existing mortgage. You will then start paying under the agreed-upon terms.

Eligibility Requirements

The specific eligibility requirements for refinancing your mortgage will depend on the lender and the loan type you choose. However, common eligibility requirements include the following:

Minimum Length of Homeownership

Some lenders require Colorado homeowners to hold their existing loan for a certain period of time before they are eligible to refinance. For example, the Streamline Refinance program through FHA requires at least six months of on-time payments.

Property Value

An appraisal is an important part of the refinancing process and may affect your eligibility. If the property doesn’t appraise for the loan amount or a percentage of it, the lender may deny your loan application.

Credit Score

Similar to a traditional mortgage loan, you will need a good credit score to qualify for a refinance loan. Most Colorado lenders require at least a 620. However, FHA loans may have lower credit score requirements.

Inspection

The lender may also order an inspection to ensure your property is in good condition. A home that requires major repairs may not qualify for refinance loans.

Property Type

Eligibility and requirements may vary, depending on the property type. For example, loan eligibility for refinancing investment or vacation properties may be stricter than for a primary residence.

Existing Loan Type

The loan type you currently have may affect your refinancing eligibility. For example, the Colorado Streamline Refinance program is only available to existing FHA or VA loans.

Available Equity

Many lenders require homeowners to have at least an 80% home-to-value loan ratio, which means they have paid down at least 20% on their original loan amount or their home has increased in value. A cash-out home equity loan may have even higher equity requirements.

Debt-to-Income (DTI) Ratio

A maximum of a 43% DTI ratio is usually required for home loans, whether acquiring a traditional mortgage or refinancing an existing one. DTI refers to the difference between your existing debt and income. A better DTI can lead to more competitive mortgage rates.

Colorado Refinance Loan Types

Colorado residents have many options available when it comes to refinancing. You also don’t have to stick with your existing mortgage type.
Here are a few of the most common types of refinance loans available in Colorado:

  • Colorado Conventional Loans

A conventional loan is a traditional mortgage. Private lenders issue conventional loans, and because they’re not backed by the government, they tend to have stricter eligibility requirements. To qualify, you will need a good credit score and a low DTI. The most favorable mortgage rates with a conventional loan are available to those with at least a 740 FICO score.

  • Colorado FHA Loans

Federal Housing Administration, or FHA loans, are backed by the government, which makes them more accessible to homeowners with lower credit scores. FHA refinance loans are available to Colorado residents, usually with a minimum credit score of 580. DTI requirements are also less with FHA loans.

Every FHA home loan in Colorado has two insurance premiums: a premium of 1.75% of the loan amount, paid upfront at closing; and an annual premium between 0.45% to 0.85%.

  • Colorado VA Loans

Colorado VA loans are available through the Veterans Administration to military members and their spouses. VA loans tend to have great mortgage rates and an easy loan application process. To qualify, you must meet certain status requirements, which F5 Mortgage can help you review.

  • Colorado Streamline Refinance Loan

A Colorado Streamline Refinance Loan is available to those with an FHA loan who want to lower their interest rate. This loan option is streamlined, meaning it’s often fast and convenient. Existing FHA borrowers may refinance an adjustable-rate mortgage into a fixed rate to qualify for better rates and lower monthly mortgage payments.

How Much Does It Cost to Refinance in Colorado?

While refinancing a mortgage in Colorado typically leads to a lower monthly payment if you can lock in a lower interest rate, doing so usually has some up-front expenses. The average cost to refinance is between 2% and 5% of the total loan amount. For example, if you refinance a home in Denver for $500,000, you can expect to pay up to $25,000 in closing costs.

However, with down payment assistance programs, not all Colorado homeowners have to pay that much to refinance. Because F5 works with the top lenders, we also make it easier to compare rates and price shop for the most affordable refinance rates.

Fee Breakdown

It’s important to consider the costs of refinancing. While you won’t need a down payment, you will have to pay other costs, like application fee, credit check, and origination. Individual costs may also vary, depending on the lender.

Homeowners in Colorado can expect to pay the following closing costs when refinancing a mortgage:

  • Application: $75 to $500
  • Origination: Between 1% to 1.5% of the total loan amount
  • Credit Report: Between $25 to $30
  • Document Preparation: Up to $600
  • Home Appraisal: Between $500 and $1,000
  • Home Inspection: From $200 to $500
  • Flood Certification: $20 to $40
  • Title Search and Insurance: From $300 to $2,000
  • Recording: From $25 to $250
  • Reconveyance: From $50 to $60
  • Attorney Fee: From $500 to $1,000

How to Calculate Your Break-Even Point?

The breakeven point of a refinance refers to the point at which you make up the closing costs you pay in return for a lower monthly payment. Calculating your break-even point can help determine if it makes financial sense to refinance your Colorado property.

Determining your break-even point is also a good idea if you plan on selling your Colorado property soon. By calculating how much money you save versus the money you pay, you can determine if you will enjoy positive savings before you plan to sell.

Calculate your break-even point using the following calculation:

  • Add all fees incurred from refinancing, including origination, discount, application, underwriting, appraisal, credit report, tax monitoring, and tax research.
  • Compare your current monthly payment to your new payment and subtract the difference.
  • Divide the incurred refinance fees by the monthly savings amount.
  • You’re left with the number of months it takes to break even.

For example, let’s say you pay $9,000 to refinance your Colorado mortgage. A lower interest rate results in a cost savings of $330 per month. ($9,000 / $330 = 27 months). 

If you plan to sell your Colorado property in less than three years, it may not make sense to refinance. However, if you plan to stay put for a few years, lowering your monthly payment could pay off in the short term. It’s also important to note that you can help control your costs by price-shopping mortgage lenders.

You could use a mortgage refinance calculator that includes your break-even calculation. F5 Mortgage is also here to help you determine if refinancing your mortgage makes financial sense. Work with a mortgage loan officer to find competitive mortgage interest rates to maximize your savings.

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