Debt is an inevitable fact of life for people across the country. But it’s not always a bad thing – many people stay in control of their debt and use it to acquire assets and boost their credit. 

Unfortunately, that’s not the case for everyone. American household debt hit a record high of $16.9 trillion at the end of 2022. This means many people are overextending themselves and allowing debt to destroy their financial freedom. For them, debt consolidation is key. 

cost to refinance mortgage

Homeowners who want to make major changes to their financial stability often refinance. This provides a fresh start on their home mortgage with different terms that can support debt consolidation. 

Whether you’re considering your first home refinance or have been through the process before, it pays to educate yourself. To help you out, we’ve outlined some key principles of debt consolidation along with information about the cost to refinance mortgage loans and what you can expect. 

Get a Fresh Start by Consolidating Your Debt

If you’re overwhelmed with debt and fed up with financial stress, you have options. There are many approaches to debt consolidation and all have the same result – you save money. But you need to start immediately. 

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Making a major move like applying for an FHA mortgage refinance will help you wipe away a lot of your debt so you can hit the reset button. However, there are financial housekeeping steps you need to take that will provide stability before pulling the trigger on a refinance. These include: 

  • Creating a detailed budget for all monthly outgoings
  • Eliminating unnecessary expenses from your budget and refocusing that money on outstanding debt
  • Transferring high-interest credit cards to bring down minimum monthly payments
  • Making lifestyle adjustments to avoid accruing more debt
  • Never missing a minimum payment and working on paying off high-interest credit cards first

Making a habit out of these practices will set you up for long-term financial security. You’ll also be in a better place as you enter into a mortgage refinance that’s right for you. 

Debt Consolidation Refinance 

If you’re overwhelmed by payments on multiple debts, opting for a debt consolidation refinance can give you back your financial freedom. This type of mortgage refinance uses your home equity to pay off credit cards, car loans, student loans, medical bills, or any debt that’s weighing you down. It involves consolidating all these debts into one simple payment. 

With a debt consolidation refinance, you apply for a loan that’s more than your current mortgage. You then pay off your current loan and consolidate your other debts into your new mortgage. Debt consolidation loans typically come with attractive terms, like lower mortgage refinance rates. This allows you to eliminate high-interest debt and reduce your monthly outgoings.  

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Cash-Out Refinance 

This type of mortgage refinance leverages your home equity to give you a lump sum you can use to pay off high-interest debts. The new loan will pay off your current mortgage and then some. An advantage of a cash-out refinance is you get immediate cash which you can use as you see fit. 

Once you have the extra cash from the refinance, you can focus on debt consolidation and use the rest for other things like investing, retirement planning, or resolving a financial emergency. Another option is using the money to make home upgrades that add value to your property and strengthen your equity. 

Check out this Cash-Out Refinance Case Study and discover how we helped our client get a $42,523 cashout with a lower, fixed-rate mortgage. 

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Mortgage Refinance Qualifications 

Whether you’re considering your first mortgage refinance or you’ve been through the process before, there are many factors to consider. Some are out of your control and others offer opportunities to bring about a successful outcome. 

There may be a cost to refinance mortgage loans, so it’s important to consider a few things before you apply. The good news is, that if you have the right strategy and work with a reputable mortgage broker, you’ll come out on top. 

Understanding the qualifications is a smart starting point. Each mortgage lender has specific requirements, but you can expect some general qualifying factors. 

how to qualify for a refinance

Debt-to-Income (DTI) Ratio 

Landers calculate your DTI by dividing your monthly debt payments by your gross monthly income. They’ll factor in the new mortgage payment when doing the math. The lower your DTI, the better chance you’ll get approved for a mortgage refinance. 

Loan-to-Value (LTV) Ratio

You can calculate your LTV by dividing the new loan amount by the appraised value of your home. Lenders want to see a lower LTV, but it’s not a deal-breaker. However, a low LTV may result in a better interest rate on the new loan. 

Credit Score

A good credit score is favorable when applying for all types of loans, and a mortgage refinance is no exception. Mortgage lenders have different credit requirements for refinancing, but it’s always better to be above 620. Some loans, like a VA refinance, have lenient credit requirements, but a higher score can result in better terms. 


When assessing risk, lenders look at your income and job stability. They want to know you can comfortably make payments on your loan. You may need to provide tax documents and pay stubs when applying for a refinance. 

Consider this – how soon can you refinance a mortgage and make it make sense for you? Since these qualifications affect mortgage refinance rates, it may be worth holding off if your credit score and income aren’t where you’d like them to be. This all plays into the long-term financial and personal cost to refinance mortgage loans. 

If you’re ready to refinance as a way to consolidate debt or take advantage of financial opportunities, The Moreira Team can help you get the ball rolling. 

The Pros and Cons of Refinancing 

There are plenty of misconceptions surrounding home refinance. One of the most common is that the process doesn’t involve extra expenses. The truth is, there’s a cost to refinance mortgage loans. However, the benefits often outweigh the financial obligation. 

Another misconception is that better mortgage refinance rates are the primary benefit and most important deciding factor. The fact is there are many ways a new loan could improve your life. 

To clear things up, let’s explore the potential advantages and disadvantages. 

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Understanding the Pros 

The advantages of a mortgage refinance depend on the type of loan and your long-term goals. However, there are several general benefits you can expect. 

Lower Monthly Payments

If you’re on a mission to consolidate debt, a new loan with the same term will reduce your monthly mortgage payments. It’s like resetting the clock, but with less to pay off because you’ve already been paying on the original loan. 

Obtaining lower mortgage refinance rates will also bring your monthly payment down. Not only can this reduce your monthly bills, you’ll pay less over the entire life of the loan. This is why it’s worth getting your credit score, DTI ratio, and LTV ratio in good shape. These factors, along with the type of loan you get, can impact your new rate. 

Pay Off Your Mortgage Faster

You have the option of getting a new loan with a shorter term period when you refinance. This sets you up for a faster pay-off, which is perfect if your goal is a debt-free life. A shorter term also means you’re accelerating your equity. 

Fixed Payments 

If you’re working toward debt consolidation and financial stability, getting control of your outgoings is key. By refinancing from an adjustable-rate to a fixed-rate mortgage, you know exactly how much your monthly payment will be. 

Adjustable-rate loans fluctuate based on changes in the market index. However, with a fixed-rate mortgage, you pay the same interest for the life of the loan. This makes budgeting and reducing other debts much easier. 

More Financial Freedom

Refinancing is a great way to take advantage of opportunities that can change your life. You can use the money from a cash-out mortgage refinance to: 

  • Pay off debt.
  • Renovate your home.
  • Start a business.
  • Fund your child’s education. 
  • Create an emergency savings account.
  • Make smart investments. 

Talk to an experienced mortgage lender at The Moreira Team to find out how much you can expect from a cash-out option

Understanding the Cons

The benefits of a mortgage refinance make it seem like a no-brainer. The truth is, it may not be appropriate for your current situation. There are potential drawbacks that could do more harm than good.

Extra Expenses

There’s a cost to refinance mortgage loans and it’s in the form of closing fees. Just like your original loan, there’s a good chance these costs are unavoidable. Closing costs include fees for the application, appraisal, title search, and other loan services. 

A problem arises if your closing costs eat into the amount you intended to save with a lower rate. The fees could also throw a wrench in your debt consolidation plans. You’ll need to run the numbers to find out if it’s worth it in the long run.  

Reduced Home Equity  

Opting for a cash-out refinance is great if you need money quickly, but it can damage your home equity. This is because you’re tapping into your equity when you take out this type of loan. In this situation, you’ll need to assess your options. If you plan on staying in your home for years and making improvements, your equity will rebound. 

Higher Monthly Payments

If you opt for a shorter loan term, you’ll probably see an increase in your mortgage payment. Yes, you’ll finish paying off the loan faster, but you’ll need to have a solid financial plan to ensure you can handle the uptick in your outgoings. Even if you get a better interest rate, cutting your loan term in half will still increase your payment. 

The Steps and Cost to Refinance Mortgage Loans

Refinancing your home is exciting. It can also cause a lot of stress. However, a little preparation will make the process run smoothly and give you peace of mind. 

Here are some steps you should take and information about the cost to refinance mortgage loans. 

cost to refinance
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Do Some Financial Housekeeping

Your first step should be to check in on your credit score. If it’s low, you may need to improve it before applying. Shooting for 620 or higher is a good target. You’ll also want to get your last two pay stubs together or your last two tax returns if you’re self-employed. 

Think About Your Goals 

It’s important to have a clear plan when refinancing. Consider whether you want a lower interest rate, shorter term, or need cash for debt consolidation. Knowing this ahead of time will help your broker find the best loan for you. 

Find the Right Broker  

There are plenty of mortgage brokers out there, but only a small number provide high-quality service. You need to work with someone who you feel comfortable with and who has the experience and resources to make the process easy. Seek out referrals and always research a broker before doing business with them. 

Apply and Consider Your Options 

Once you’ve found a lender you want to work with, it’s time to apply for a refinance. They’ll review your credit, home value, and income. You’ll get a loan estimate, which outlines features like the new payment and interest rate. Once you’ve chosen an option, your broker will begin the process. 

Prepare for Closing

You’ll sign a closing disclosure that has the final details of your refinance. This initiates the closing process. Next, you’ll sign the actual loan and have the funds within several days. Remember, there’s a closing cost to refinance mortgage loans, but your broker will run through all that so you’re not caught off guard. 

How the Moreira Team Can Help

When you’re ready to refinance, give us a call. Our team has the experience and knowledge to find the best option for your situation. 

Here’s what you can expect: 

  • Our team will perform a quick assessment to see where you stand financially. 
  • We’ll review your mortgage statement to understand what you’re currently paying. 
  • We’ll review your finances and look for any debt that can be consolidated. 
  • After accessing your debt, we’ll determine your monthly payments. 
  • Taking your equity into consideration will help us figure out your consolidation. 
  • We’ll give you a quote, which will show your new payment. 

If you’re facing foreclosure or bankruptcy, don’t panic. Let us know and we’ll provide the best plan possible. 

Contact Us and Cut the Cost to Refinance Mortgage Loans 

Start your journey to debt consolidation and financial freedom with a mortgage refinance that fits your needs. The Moreira Team can walk you through the process and provide you with the best rates possible. 

We understand the cost to refinance mortgage loans and can advise you on how to reach your long-term financial goals.  Contact us today for a custom rate quote.

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