WHAT IS A MORTGAGE REFINANCE?

A refinance replaces your existing mortgage with a new mortgage.

The new loan is generally used to pay off your existing mortgage, and the new loan becomes your current mortgage obligation.

Depending on your objectives, a refinance may be structured to:

• Reduce the interest rate

• Change the loan term

• Lower the monthly principal and interest payment

• Move from an adjustable-rate mortgage to a fixed-rate mortgage

• Move from a fixed-rate mortgage to an adjustable-rate mortgage

• Remove mortgage insurance when eligible

• Access available home equity

• Consolidate certain debts

• Fund home improvements

• Restructure your mortgage

• Change the loan's repayment period

• Reposition your finances for future goals

A refinance does not automatically save money.

The correct analysis should consider the new interest rate, closing costs, loan term, monthly payment, cash required, total interest, equity position, and how long you expect to keep the new mortgage.

THE REFINANCE PROCESS

STEP 1 — START WITH A MORTGAGE PLANNING CONSULTATION

Before recommending a refinance, Brandon begins by understanding why you are considering one.

You may want to:

Lower your payment

Lower your interest rate

Shorten your loan term

Access equity

Pay for renovations

Consolidate eligible debt

Remove mortgage insurance

Change your loan type

Move from an ARM to a fixed rate

Move from a fixed rate to an ARM

Prepare for retirement

Purchase another property

Improve cash flow

Reposition your finances

The reason for refinancing should influence the type of refinance you consider.

STEP 2 — REVIEW YOUR CURRENT MORTGAGE

Before replacing your existing mortgage, we need to understand what you already have.

Important information can include:

• Current loan balance

• Current interest rate

• Loan type

• Original loan amount

• Remaining term

• Monthly principal and interest

• Mortgage insurance

• Escrow payment

• Property taxes

• Homeowners insurance

• Current payoff amount

• Prepayment provisions, if applicable

• Current loan maturity date

This establishes the baseline against which the new mortgage can be compared.

STEP 3 — DETERMINE YOUR HOME'S CURRENT VALUE

Your home's current market value is extremely important in a refinance.

It can affect:

• Loan-to-value ratio

• Available equity

• Cash-out eligibility

• Interest-rate pricing

• Mortgage insurance

• Loan program eligibility

• Maximum refinance amount

Depending on the transaction and lender, the property may require an appraisal or another acceptable valuation method.

If your home has appreciated substantially since you purchased it, the increase in value may have created additional equity.

STEP 4 — CALCULATE YOUR EQUITY

Your approximate equity can be thought of as:

Current Property Value − Mortgage Debt = Approximate Equity

For example:

Home Value: $600,000
Mortgage Balance: $350,000

Approximate equity:

$250,000

However, not all of that equity can necessarily be accessed through a refinance.

Maximum loan-to-value limits, loan type, property type, credit, income, reserves, and other requirements determine how much equity may potentially be available.

STEP 5 — DETERMINE YOUR REFINANCE OBJECTIVE

NOT ALL REFINANCES ARE THE SAME

There are several major refinance strategies.

RATE-AND-TERM REFINANCE

A rate-and-term refinance generally changes the interest rate, loan term, or both without taking substantial cash equity out of the property.

Potential objectives include:

• Lowering the interest rate

• Lowering the payment

• Shortening the loan term

• Moving from an ARM to a fixed rate

• Changing loan structure

• Potentially removing mortgage insurance when eligible

EXAMPLE

You currently have:

30-Year Mortgage at 7.00%

You refinance into:

30-Year Mortgage at 6.00%

Your new payment may be lower, but the total economics depend on the new loan balance, closing costs, loan term, and how long you keep the mortgage.

CASH-OUT REFINANCE

A cash-out refinance allows a homeowner to replace an existing mortgage with a larger mortgage and potentially receive a portion of available equity as cash, subject to program and lender limits.

Possible uses may include:

• Home improvements

• Renovations

• Debt consolidation

• Investment opportunities

• Business purposes, where permitted

• Education expenses

• Major purchases

• Other financial objectives

EXAMPLE

Home Value: $600,000
Existing Mortgage: $300,000

Depending on the applicable loan program and maximum LTV requirements, you may be able to refinance for more than your current balance and receive a portion of the difference at closing.

The actual amount available depends on the program, appraisal, loan-to-value requirements, closing costs, credit, income, and other underwriting factors.

DEBT-CONSOLIDATION REFINANCE

Some homeowners consider refinancing to consolidate higher-interest debt.

For example, you may have:

• Credit cards

• Personal loans

• Other eligible debts

A refinance may potentially replace multiple payments with one mortgage payment.

But there is an important consideration:

YOU ARE MOVING DEBT ONTO YOUR HOME.

Mortgage debt is secured by your property.

Therefore, debt consolidation should be carefully analyzed rather than viewed simply as a way to obtain a lower monthly payment.

The right comparison is:

Monthly payment + interest rate + total interest + loan term + closing costs + risk.

CASH-OUT FOR HOME IMPROVEMENTS

Homeowners may also consider accessing equity to improve their property.

Potential projects may include:

• Kitchen renovations

• Bathroom renovations

• Roofing

• HVAC

• Flooring

• Additions

• Structural improvements

• Energy improvements

• General remodeling

The key question is whether the improvement supports your goals and whether using mortgage debt to fund it is financially appropriate.

CONVENTIONAL REFINANCING

FANNIE MAE & FREDDIE MAC

Conventional refinance loans are generally not insured by FHA, VA, or USDA.

Many conventional loans are eligible for purchase or securitization through the conventional mortgage system associated with Fannie Mae and Freddie Mac.

Depending on the borrower's circumstances and property, conventional refinancing may offer:

• Rate-and-term refinancing

• Cash-out refinancing

• Fixed-rate options

• Adjustable-rate options

• Potential mortgage insurance changes

• Various term options

Conventional refinance eligibility depends on current program guidelines, loan limits, property type, occupancy, credit, income, equity, and other factors.

FHA REFINANCING

FEDERAL HOUSING ADMINISTRATION OPTIONS

FHA offers several refinance pathways for eligible borrowers.

Potential FHA refinance structures can include:

FHA STREAMLINE REFINANCE

Designed for certain existing FHA borrowers and generally intended to simplify the refinance process when applicable requirements are met.

FHA RATE-AND-TERM REFINANCE

May be used to refinance an existing mortgage under applicable FHA guidelines.

FHA CASH-OUT REFINANCE

Eligible homeowners may potentially access equity through an FHA cash-out refinance, subject to FHA requirements and applicable LTV limits.

FHA 203(k)

For eligible properties and transactions, FHA's 203(k) program can combine refinancing with eligible renovation financing.

FHA loans involve mortgage insurance and specific program requirements.

The correct FHA refinance strategy depends on the homeowner's existing mortgage, equity, property, occupancy, credit, and objectives.

VA REFINANCING

FOR ELIGIBLE VETERANS AND QUALIFIED BORROWERS

VA refinancing can provide valuable options for eligible veterans, active-duty service members, and other qualified borrowers.

Major VA refinance pathways include:

VA IRRRL

The Interest Rate Reduction Refinance Loan, commonly known as the IRRRL, is designed for certain existing VA-backed mortgage borrowers who want to refinance their VA loan.

Potential objectives can include:

• Lowering the interest rate

• Changing loan terms

• Potentially lowering the monthly payment

Eligibility and VA requirements apply.

VA CASH-OUT REFINANCE

Eligible borrowers may also be able to access home equity through a VA cash-out refinance, subject to applicable requirements.

VA refinancing can be especially valuable when the homeowner's existing financing no longer represents the best available strategy.

USDA REFINANCING

RURAL DEVELOPMENT REFINANCE OPTIONS

USDA provides refinance options for eligible borrowers and properties.

Depending on the applicable USDA program, refinance options may include streamlined or non-streamlined structures.

Eligibility can depend on:

• Existing USDA financing

• Property eligibility

• Occupancy

• Income

• Loan characteristics

• Current USDA guidelines

USDA refinance programs are designed for qualifying properties and borrowers and have specific program requirements.

NON-QM REFINANCING

WHEN TRADITIONAL REFINANCING DOESN'T FIT YOUR FINANCIAL PROFILE

Non-QM means Non-Qualified Mortgage.

Non-QM refinancing can provide alternative financing options for borrowers whose income, assets, property, or financial circumstances may not fit traditional underwriting.

Depending on lender availability, Non-QM refinance programs may include:

BANK-STATEMENT REFINANCING

Certain self-employed borrowers may qualify using bank-statement documentation rather than relying exclusively on traditional tax-return income calculations.

ASSET-DEPLETION / ASSET-UTILIZATION

Certain programs may allow eligible assets to be considered as a source of qualifying income under specified underwriting methodologies.

DSCR REFINANCING

For eligible investment properties, qualifying rental income may play a significant role in determining the property's ability to support the new debt.

1099 REFINANCING

Certain lenders offer alternative documentation approaches for eligible borrowers receiving 1099 income.

P&L-BASED PROGRAMS

Certain self-employed borrowers may qualify using eligible profit-and-loss documentation.

FOREIGN-NATIONAL PROGRAMS

Some lenders offer refinance programs for eligible foreign-national borrowers.

INVESTOR REFINANCING

Alternative financing may be available for qualifying investment properties and real estate investors.

Non-QM does not mean "no documentation" or "no underwriting."

These programs still have requirements and may carry higher rates, fees, reserves, or other costs than conventional financing.

ADJUSTABLE-RATE MORTGAGE REFINANCING

ARMs CAN BE PART OF A REFINANCE STRATEGY

An Adjustable-Rate Mortgage may be appropriate for certain borrowers who understand and accept future interest-rate risk.

Common ARM structures include:

3/1 ARM

Initial fixed-rate period followed by annual adjustments.

5/1 ARM

Five-year initial fixed period followed by annual adjustments.

7/1 ARM

Seven-year initial fixed period followed by annual adjustments.

10/1 ARM

Ten-year initial fixed period followed by annual adjustments.

5/6 ARM

Five-year initial fixed period followed by adjustments every six months.

7/6 ARM

Seven-year initial fixed period followed by adjustments every six months.

Other ARM structures may be available depending on the lender and loan program.

HOW ARM RATES ADJUST

An ARM generally uses:

INDEX + MARGIN = FULLY INDEXED RATE

The loan also generally contains adjustment caps that limit how quickly the interest rate can change.

Important components include:

• Initial fixed-rate period

• Index

• Margin

• Initial adjustment cap

• Subsequent adjustment cap

• Lifetime cap

• Adjustment frequency

Before choosing an ARM, you should understand the potential payment under higher-rate scenarios.

WHEN COULD AN ARM REFINANCE MAKE SENSE?

An ARM may be worth considering if:

• You expect to move within the initial fixed period

• You anticipate refinancing again

• You want a lower initial payment

• You have a strong understanding of future rate risk

• You expect your financial circumstances to change

• The ARM's total economics make sense

The initial rate should never be the only factor.

ASK:

What happens if rates rise?

What is the maximum potential rate?

What could my payment become?

Can I comfortably afford that payment?

What happens if I cannot refinance later?

MORTGAGE RATE BUYDOWNS

PERMANENT AND TEMPORARY OPTIONS

A mortgage buydown can reduce the borrower's interest rate or effective payment in exchange for an upfront cost or eligible contribution.

There are two primary approaches:

Permanent Buydown

Temporary Buydown

PERMANENT BUYDOWN

A permanent buydown generally involves paying discount points to reduce the mortgage interest rate for the life of the loan.

For example:

Without points: 6.50%

With points: 6.125%

The actual pricing depends on the lender and market conditions.

The benefit is a lower rate for the duration of the mortgage.

But the borrower must compare:

Upfront cost vs. monthly savings.

BREAK-EVEN ANALYSIS

Suppose:

Cost of points: $6,000

Monthly savings: $150

Approximate break-even:

$6,000 ÷ $150 = 40 months

If you keep the loan longer than the break-even period, the buydown may potentially provide greater value.

If you sell or refinance before reaching the break-even point, the upfront cost may not be recovered.

TEMPORARY BUYDOWN

A temporary buydown reduces the effective interest rate for a limited initial period.

2-1 BUYDOWN

The effective rate is generally reduced by approximately:

2% in year one

1% in year two

Full note rate beginning in year three

3-2-1 BUYDOWN

The effective rate may be reduced progressively over three years before reaching the full note rate.

The exact structure depends on the loan program and lender.

WHO MAY PAY FOR A BUYDOWN?

Depending on applicable rules and loan-program requirements, eligible buydown funds may potentially come from:

• Borrower funds

• Seller contributions

• Builder incentives

• Other eligible interested-party contributions

Contribution limits apply.

WHY A BUYDOWN MAY BE ATTRACTIVE DURING A REFINANCE

Buydowns are more commonly discussed in purchase transactions, but where permitted by the applicable refinance program and transaction structure, rate-reduction strategies may be worth evaluating.

The important consideration is whether the upfront cost creates enough long-term benefit.

THE CERTIFIED MORTGAGE PLANNING SPECIALIST ADVANTAGE

REFINANCING IS MORE THAN REPLACING ONE LOAN WITH ANOTHER.

A Certified Mortgage Planning Specialist approaches refinancing as part of a broader financial strategy.

Instead of asking:

"What is today's refinance rate?"

The conversation becomes:

"What do you want your mortgage to accomplish?"

BENEFIT #1 — IDENTIFY THE REAL REASON TO REFINANCE

A homeowner may think they want a lower rate when the actual objective is:

• Lower monthly payment

• Debt consolidation

• Equity access

• Mortgage insurance removal

• Shorter loan term

• Retirement planning

• Investment capital

• Home improvement

• Improved cash flow

• Reduced interest expense

The correct strategy depends on the objective.

BENEFIT #2 — CALCULATE YOUR BREAK-EVEN POINT

Refinancing costs money.

Potential costs can include:

• Origination charges

• Discount points

• Appraisal

• Credit report

• Title services

• Recording fees

• Attorney fees

• Prepaid interest

• Escrows

• Other closing costs

If refinancing costs $10,000 and saves $300 per month:

$10,000 ÷ $300 = approximately 33 months

That is the simple monthly-payment break-even calculation.

But a complete analysis should also consider loan term, interest expense, opportunity cost, and how long you expect to own the property.

BENEFIT #3 — AVOID THE "RESET THE CLOCK" PROBLEM

A homeowner with 25 years remaining on an existing mortgage may refinance into a new 30-year loan.

The payment could be lower.

But the borrower may also extend the repayment period by five years.

A mortgage planning analysis can compare:

Lower payment

vs.

Total interest

vs.

Remaining term

vs.

New term

vs.

Accelerated payoff options

A lower payment does not automatically mean a lower total cost.

BENEFIT #4 — EVALUATE CASH-OUT STRATEGICALLY

Cash-out refinancing can unlock equity.

But using home equity creates additional debt secured by your home.

A mortgage planner can help you evaluate:

How much should you take?

What will you use it for?

What will the new payment be?

What is the cost of the money?

Will the funds create or improve financial value?

How will this affect your long-term goals?

BENEFIT #5 — COMPARE MULTIPLE LOAN STRUCTURES

Instead of looking at one refinance quote, mortgage planning allows you to compare strategies.

For example:

OPTION A

30-Year Fixed

OPTION B

20-Year Fixed

OPTION C

15-Year Fixed

OPTION D

5/1 ARM

OPTION E

7/1 ARM

OPTION F

10/1 ARM

OPTION G

Cash-Out Refinance

OPTION H

Debt-Consolidation Refinance

OPTION I

Non-QM Refinance

The best option depends on your financial objectives.

REFINANCE DOCUMENT CHECKLIST

The documentation required varies based on the borrower, loan program, property, and income type.

However, you should generally be prepared to provide:

PERSONAL INFORMATION

• Government-issued photo ID

• Social Security number

• Current address

• Previous addresses, when applicable

• Marital-status information where required for the application

• Contact information

EMPLOYMENT & INCOME

Potentially:

• Recent pay stubs

• W-2s

• Federal tax returns

• 1099s

• Employment verification

• Year-to-date income documentation

• Bonus documentation

• Commission documentation

• Overtime documentation

• Pension documentation

• Social Security documentation

• Retirement income documentation

SELF-EMPLOYED BORROWERS

Self-employed borrowers may need additional documentation, potentially including:

• Personal tax returns

• Business tax returns

• Profit-and-loss statements

• Balance sheets

• Business bank statements

• Business licenses

• Corporate or partnership documents

• Ownership documentation

• Year-to-date financial statements

The exact documentation depends on the loan program and underwriting requirements.

ASSET DOCUMENTATION

You may need:

• Bank statements

• Savings statements

• Investment account statements

• Retirement account statements

• Stocks

• Bonds

• Other eligible assets

• Documentation for large deposits

• Gift documentation, where applicable

EXISTING MORTGAGE DOCUMENTATION

The lender may need:

• Current mortgage statement

• Mortgage account information

• Current payoff information

• Existing loan terms

• Mortgage insurance information

• Escrow information

PROPERTY DOCUMENTATION

Potential documentation may include:

• Homeowners insurance declaration page

• Property tax information

• Current deed information

• HOA documentation

• Condo documents

• Lease agreements for rental properties

• Rental income documentation

• Existing property-related obligations

REFINANCE PROCESS: FROM APPLICATION TO CLOSING

1. CONSULTATION

Determine your objective.

2. DOCUMENT COLLECTION

Provide income, asset, credit, mortgage, and property documentation.

3. LOAN APPLICATION

Complete the mortgage application and select the appropriate refinance strategy.

4. DISCLOSURES

Review and acknowledge the applicable loan disclosures.

5. PROCESSING

The lender verifies your financial information and prepares the loan for underwriting.

6. APPRAISAL / PROPERTY VALUATION

The lender obtains an appraisal or other acceptable valuation when required.

7. TITLE

The title company or applicable closing professional verifies ownership, liens, and other title-related matters.

8. UNDERWRITING

The underwriter evaluates the complete loan file.

9. CONDITIONS

Any outstanding conditions must be satisfied.

10. FINAL APPROVAL

The lender provides final approval when all applicable requirements have been satisfied.

11. CLOSING DISCLOSURE

You receive the applicable final closing information and review the final loan terms and costs.

12. CLOSING

You sign the refinance documents and provide any required funds.

13. FUNDING & PAYOFF

The new loan funds and the existing mortgage is paid off according to the transaction.

14. YOUR NEW MORTGAGE BEGINS

Your new payment schedule and loan terms become effective according to the new mortgage documents.

HOW LONG DOES A REFINANCE TAKE?

There is no guaranteed timeline.

A refinance can be affected by:

• Borrower documentation

• Loan complexity

• Property type

• Appraisal

• Title

• Underwriting

• Income verification

• Asset verification

• Loan program

• Lender volume

• Outstanding conditions

• Closing availability

Providing complete documentation quickly and responding promptly to requests can help prevent avoidable delays.

BEFORE YOU REFINANCE, ASK THESE QUESTIONS

WHAT IS MY CURRENT INTEREST RATE?

WHAT IS MY CURRENT LOAN BALANCE?

WHAT IS MY HOME WORTH?

HOW MUCH EQUITY DO I HAVE?

WHAT ARE MY REFINANCE COSTS?

WHAT WILL MY NEW PAYMENT BE?

HOW LONG WILL I KEEP THE NEW LOAN?

WHAT IS MY BREAK-EVEN POINT?

HOW MUCH TOTAL INTEREST WILL I PAY?

AM I EXTENDING MY LOAN TERM?

SHOULD I TAKE CASH OUT?

SHOULD I PAY POINTS?

SHOULD I CONSIDER AN ARM?

CAN I REMOVE MORTGAGE INSURANCE?

WOULD A DIFFERENT LOAN PROGRAM BE BETTER?

WHAT HAPPENS IF I DON'T REFINANCE?

These questions are the foundation of a true mortgage planning conversation.

YOUR MORTGAGE SHOULD WORK FOR YOU

A refinance should not be based solely on a headline interest rate.

The right refinance strategy considers:

Your Home

Your Equity

Your Income

Your Debt

Your Cash Flow

Your Goals

Your Risk

Your Timeline

Your Future

That's the difference between simply refinancing a mortgage and planning a mortgage strategy.

WORK WITH BRANDON S. BROUSSARD

MORTGAGE LOAN ORIGINATOR + CERTIFIED MORTGAGE PLANNING SPECIALIST

Brandon S. Broussard

Mortgage Loan Originator
Nextgen Mortgage Inc.
Licensed in Massachusetts & New Hampshire
NMLS #1914798

Brandon helps homeowners evaluate refinancing opportunities through a comprehensive mortgage-planning approach.

Whether your objective is to reduce your payment, access equity, consolidate eligible debt, change your loan structure, eliminate mortgage insurance when eligible, shorten your mortgage term, or reposition your finances for the future, the first step is understanding the numbers.

DON'T REFINANCE BECAUSE SOMEONE SAYS RATES ARE LOWER.

REFINANCE BECAUSE THE NUMBERS AND THE STRATEGY MAKE SENSE FOR YOU.

START YOUR REFINANCE ANALYSIS TODAY

MORTGAGE DISCLOSURE

Mortgage financing is subject to credit approval, underwriting, property eligibility, income verification, asset verification, appraisal or other valuation requirements, and other applicable conditions. Not all borrowers will qualify for all programs.

Fannie Mae, Freddie Mac, FHA, VA, USDA, Conventional, Non-QM, ARM, cash-out, and other refinance programs have specific eligibility requirements. Loan programs, rates, terms, fees, loan-to-value requirements, mortgage insurance requirements, closing costs, and underwriting guidelines are subject to change and vary by lender and borrower circumstances.

A refinance may or may not reduce your total cost of borrowing. A lower monthly payment may result from extending the loan term and may increase total interest paid over the life of the loan. Cash-out refinancing increases mortgage debt and may place additional debt against your home.

Buydowns, discount points, seller or other contributions, and temporary rate-reduction structures are subject to the applicable loan program, lender requirements, contribution limits, and transaction eligibility. ARM rates and payments may increase after the initial fixed-rate period and are subject to the terms, indices, margins, and caps contained in the applicable loan documents.

Non-QM programs have varying documentation, reserve, credit, property, and income requirements and may have different pricing or costs from conventional mortgage products.

The information presented on this page is for general educational purposes and is not financial, tax, legal, or investment advice. Borrowers should consult appropriately licensed professionals regarding their individual circumstances.

Nextgen Mortgage Inc. — [Company NMLS Number]

Brandon S. Broussard — NMLS #1914798

Equal Housing Opportunity.