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Lower Your Monthly Payment

Can refinancing lower your monthly mortgage payment?

Let us help you explore your options and learn if refinancing is an option for you.

If you are looking to lower your monthly mortgage payment, you might want to consider refinancing. Learn about refinancing from the nation’s #1 home refinance lender. 

What are the benefits of refinancing?Show Details

 
When interest rates drop, refinancing may be the right choice for your financial situation. Consider the following advantages of refinancing to a lower interest rate:
Increased cash flow.
  • Your loan’s monthly payment typically decreases with a lower interest rate.With a lower payment, you can use the extra funds for retirement savings, paying other debts, saving money for college, or other purposes.
Potential to switch to a different loan type.
  • If you have an adjustable-rate (ARM) or a balloon mortgage, reduced interest rates may make a fixed-rate mortgage more desirable, especially if you want the stability of an interest rate that does not change over time.
  • If you have a long time left on your mortgage, lower interest rates may make it possible to switch to a shorter-term mortgage.
    • You can pay the principal balance down and build equity faster.
    • You may pay less interest over the life of the loan with a shorter term loan.
  • If you have a jumbo loan you may be able to refinance to a "blended jumbo" (Mortgage + Home Equity Financing).
Opportunity to access the equity in your home.
  • While you’re lowering your interest rate, you may want to consider using the equity in your home to pay for major purchases or to make home improvements.
    • This type of loan is known as a cash-out refinance.
  • See how much available equity you have for a cash-out refinance with a Free Refinance Analysis.

How can I decide if refinancing may be right for me?Show Details

 
Before you decide to refinance to repay your loan faster, consider the following so that you make a well-informed decision:
Before you decide to refinance to repay your loan faster, consider the following so that you make a well-informed decision:

What are the estimated costs?
When you refinance, you may pay:
  • An origination charge , which may include fees such as application or processing.
  • Discount points to lower your interest rate further. (May be tax deductible. Consult your tax advisor regarding deductibility).
  • Other settlement charges such as appraisal, credit report, title search, and title insurance fees.
If you’re an existing Wells Fargo Home Mortgage customer, you may be eligible for a streamlined refinance with no closing costs, application, or appraisal fees.1
Find out more about our streamlined refinance.
lightbulbYou may be eligible for a reduced reissue or refinance rate on your title insurance if the property’s current policy was issued recently. Ask your title or closing agent if you qualify.
 

Does my loan have prepayment penalties?
  • If there’s a penalty for early payment of your current loan, this will add to the refinance cost.
How long will I stay in my home?
  • If you plan on staying in your current home for an extended period of time, and the interest rates are 1/2% to 5/8% lower than your current rate, refinancing may be the right choice for you.


How can I determine the break-even point?
  • You may benefit from our Refinance Calculator, which easily compares your existing loan with a new loan.
  • Your break-even point is when your savings from your new loan equals the cost of getting the new loan.
Over time, you may be able to break even on your refinance closing costs.
 

What financing basics should I understand?Show Details

 
If you obtain a loan to lower your monthly payment you will repay more than you borrowed. In addition to your interest rate, term and loan amount, how much you repay is determined by several factors. Here are the components you need to know:
Interest Rate
  • The interest rate is the percentage of your loan amount we charge you to borrow money.
  • Interest rates are based on current market conditions, your credit score, down payment, and the type of mortgage you choose. Check today’s rates.
Discount points
  • One point equals 1% of your mortgage amount.
  • If you qualify, you may be able to pay one or more points to lower your interest rate. A lower interest rate means lower monthly mortgage payments.
  • You may be able to finance points as part of your mortgage amount.
  • Points are usually tax deductible. (Consult a tax advisor on the deductibility of discount points.)
Origination charge
  • The amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved will receive for originating the loan.
  • This charge covers items including fees, document preparation, and underwriting costs, and other expenses.
  • If you qualify, you may be able to finance the origination charge as part of your mortgage amount.
Loan term
  • Your loan term is the amount of time you have to pay off your mortgage balance.
  • Shorter loan terms typically mean higher monthly mortgage payments, but often have lower interest rates. And if you pay off your mortgage balance within a shorter term, you may pay less in total interest than with a longer-term mortgage.
Remember that interest rates only tell part of the story. The total cost of a mortgage is reflected by the interest rate, discount points, and origination charges. This total cost is known as the annual percentage rate (APR), which is typically higher than the interest rate. The APR enables you to compare mortgages of the same dollar amount by considering their total annual cost.
What is PITI? PITI stands for the four elements that make up most mortgage payments: Principal, Interest, Taxes, and Insurance.

Your monthly mortgage payment is typically made up of four parts:

  • Principal is the amount of money you borrowed.
  • Interest is the cost of borrowing the money.
  • Taxes are the property taxes charged by your local government. Typically we collect a portion of these taxes in every mortgage payment and hold the funds in an escrow account for tax payments made on your behalf as they become due.
  • Insurance refers to homeowners or hazard insurance that provides protection against losses from property damage due to wind, fire or other risks. Like taxes, insurance costs are typically collected and paid from an escrow account.
View loan options now.

Depending upon your property location, property type and loan amount, you may incur other monthly or annual expenses such as mortgage insurance, flood insurance, and homeowners association fees.
 

What should I know about refinancing for a lower mortgage payment?Show Details

 
A drop in interest rates can mean lower monthly payments. When you refinance, you can:
Eliminate private mortgage insurance (PMI)
  • If your original down payment was below 20%, you’re probably paying PMI.
  • If you have made timely payments for a period of time, you may have established enough equity to eliminate PMI which could lower your monthly mortgage payments.
Access the equity in your home without reapplying (if you qualify)
  • Combine a Wells Fargo first mortgage with home equity financing to provide the minimum 20 percent down payment needed to avoid PMI.
  • You complete only one application, work with a single contact, and attend one simultaneous closing transaction for both products.
  • You can choose from a variety of fixed-rate financing options
Refinance to a longer-term loan
  • A longer-term loan can lower your monthly payments, but increases the total interest you’ll pay over the life of the loan.
  • You may have additional costs from the closing transaction.
  • If other debts are causing cash-flow issues, consider Debt Consolidation, which may enable you to lower the total of your monthly payments
Pay discount points to reduce your interest rate
  • If you plan on staying in your home for an extended period of time, it might make sense to pay discount points to reduce your interest rate.
  • One discount point – which is 1% of your loan amount – reduces your interest rate approximately 0.25%, reduces monthly payments and interest over the life of a fixed-rate loan, and may be tax deductible. (Consult your tax advisor on the deductibility of interest.)
Plan for an interest rate change in an adjustable-rate mortgage (ARM)
  • Adjustable rate mortgages provide an interest rate and payment that may change (increase or decrease) over time, based on market rates.
  • For refinancing strategies and details, see Convert to a Fixed Rate.

What criteria are used to assess my application?Show Details

 
When your application is complete, we review the following four components:
Income:
  • Do you have a reliable, continuing source of income to make monthly payments?
  • Income can come from primary, second, and part-time jobs, as well as overtime, bonuses, and commissions.
  • You may use other sources of income if you want them considered for payment – including retirement or veteran’s benefits, disability payments, alimony, child support, and rental or investment income – provided they can be verified as stable, reliable, and likely to continue for at least three years.
Learn more about establishing and improving your credit
 
Current debts and credit history:
  • Do you pay your bills, loans, credit cards, and other debts on time?
  • We examine your payment habits before deciding to loan you money.
  • Your credit history and credit score are also examined prior to deciding to loan you money. Wells Fargo also offers a series of online credit education videos.
  • It's a good idea to check your credit history and correct any problems before applying.
Assets and available funds:
  • Do you have enough funds for closing costs?
  • You may use funds from a savings account, certificate of deposit (CD), investments, and retirement fund.
  • In some cases, you may be able to use a gift from a relative, friend, employer, or not-for profit organization.
  • In many cases you will also have to demonstrate that you have additional funds in your accounts to cover several months of mortgage, tax, and insurance payments.
The property
  • What is the market value of the property you want to purchase?
  • We will order a property appraisal to make sure your property’s value meets our underwriting requirements.

Responsible lending guidelines

We approve applications where we believe the borrower has the ability to repay the loan or line of credit according to its terms. We use two ratio-based guidelines to evaluate your ability to repay.
What is debt-to-income ratio? Debt-to-income ratio is the percentage of your monthly income that is spent on monthly debt payments.
 
What is housing-to-income ratio? Housing-to-income ratio is the percentage of your monthly income that is spent on monthly housing payments.
 
Debt-to-income ratio:
  • Your expected monthly mortgage payment (principal, interest, taxes, and insurance) plus your other monthly debt obligations to your gross (pre-tax) monthly income are compared.
  • Mortgage program guidelines vary, but a good rule of thumb is to keep your total debt level at or below 36% of your gross monthly income.
Housing-expense-to-income ratio:
  • We also compare just your expected monthly mortgage payment (including taxes and insurance) to your gross monthly income.
  • Mortgage program guidelines vary, but a good rule of thumb is to keep your housing expense level at or below 28%.
How to calculate your ratios

Even if you fall within the 28%/36% rules of thumb, make certain that you feel comfortable making your monthly mortgage, insurance and tax payments and the payments on all your other monthly obligations. Homes have other costs—such as utilities, maintenance and repairs—that may not exist if you rent.

What can I do if I am having trouble making my payments?Show Details

 
If you are facing payment challenges, don’t wait another day. We’re here to help you understand your options.
MortgageHome Equity
If you’re struggling to make your monthly payments, or think you may have difficulty making payments in the future, find out about possible options that may allow you to keep your home in our Get Help With Payment Challenges section. The Wells Fargo Home Equity Assist program was created to help home equity customers through difficult times. If you're having financial difficulties, you may be eligible for a reduced monthly payment or gain more time to repay your loan.
  • Call 1-877-628-9584 today for more information.
  • If you don't have time to call now, you can request an appointment for a Home Equity Specialist to call you at a time that is convenient for you.
Ready to apply?
1-877-937-9357
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Mortgage Financing: Get Started
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1-888-667-1772
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Get an Estimate: Refinance Analysis

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Discount Points

 
A discount point is 1% of your loan amount.
 
 
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Origination Charge

 
One amount that includes all charges (other than discount points) that all loan originators (lenders and brokers) involved in the transaction will receive for originating the loan. This includes any application, processing, underwriting fees, and payments from the lender to the broker for origination.
 
 
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Title Insurance

 
An insurance policy that protects a lender and/or homebuyer (only if homebuyer purchases a separate policy, called owner's coverage) against any loss resulting from a title error or dispute. On a refinance, if the property has had a recent title insurance policy, a homeowner may sometimes be eligible for a reduced rate on the title insurance (also known as the reissue or refinance rate).
 
 
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PMI

 
Private mortgage insurance (PMI) is insurance written by a private company that protects the lender from losses in the event the borrower defaults on the mortgage. Borrowers are required to pay the premium for private mortgage insurance. Private mortgage insurance limits a lender's exposure to financial loss resulting from loan default. If you make a down payment of less than 20%, even if you have a good credit profile, lenders generally require private mortgage insurance.
 
 
 
If you are a servicemember on active duty, prior to seeking a refinance of your existing mortgage loan, please consult with your legal advisor regarding the loss of any benefits you are entitled to under the Servicemembers Civil Relief Act or applicable state law.
1 Closing documents must be witnessed and notarized. You may need to pay a minimal fee to a notary public.
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