Refinance
Lower your payment, access equity, or restructure your loan — here is how to know if refinancing makes sense.
Refinancing is a math problem with personal variables. We serve homeowners across New Jersey and eastern Pennsylvania — Bucks, Montgomery, Chester, Delaware, and Philadelphia counties. The right answer depends on your current rate, how long you plan to stay, what you need the money for, and what your goals are. We will help you run the numbers and decide with confidence.
Types of refinance
Not all refinances are the same. The type you choose depends on your goal.
Rate-and-term refinance
A rate-and-term refinance replaces your current mortgage with a new one at a different rate, term, or both — without taking cash out. This is the most common type and makes sense when rates have dropped enough to offset closing costs, or when you want to switch from an adjustable rate to a fixed rate for stability. The key question is break-even: how many months of savings does it take to recoup the closing costs?
Cash-out refinance
A cash-out refinance replaces your mortgage with a larger one and gives you the difference in cash. Common uses include home renovations, debt consolidation, college tuition, or funding an investment property down payment. In New Jersey, where over 48% of homeowners are equity-rich (owning at least 50% of their property value), cash-out refinancing is a powerful tool — but it is not free money. You are borrowing against your home, extending your debt, and paying interest on the cash you take out.
Example: Home worth $500,000, current balance $250,000. At 80% LTV you could access up to $150,000 in cash ($400,000 new loan minus $250,000 payoff). Your monthly payment would increase, but if you are using the cash to eliminate $150,000 in credit card debt at 22% interest, the math heavily favors the refinance.
FHA Streamline and VA IRRRL
If you currently have an FHA or VA loan, streamline refinance programs offer reduced documentation and faster closing. FHA Streamline does not require income verification, a new appraisal (in most cases), or credit qualification. VA Interest Rate Reduction Refinance Loans (IRRRL) are similarly streamlined. Both are designed to lower your rate and payment with minimal hassle.
When does refinancing actually make sense?
The decision to refinance comes down to math and goals. Here are the scenarios where the numbers usually work.
The break-even calculation
Divide your total closing costs by your monthly savings. If closing costs are $6,000 and you save $200 per month, your break-even is 30 months (2.5 years). If you plan to stay in the home longer than that, the refinance pays for itself. If you might sell or move before break-even, it probably does not make sense — unless you roll the costs into the loan and the rate still saves you money.
Rate drop of 0.5% to 0.75% or more
The old rule of thumb was "wait for a 1% drop." That is outdated. On a $400,000 loan, a 0.5% rate reduction saves roughly $120 per month or $1,440 per year. With closing costs around $5,000 to $7,000, your break-even is about 3.5 to 5 years. If you bought when rates peaked near 7.5% to 8% in late 2023 and rates are now in the low 6s, the math likely works.
Removing PMI through refinance
If your home has appreciated and you now have 20% or more equity, refinancing into a new conventional loan eliminates mortgage insurance. PMI typically costs $100 to $300 per month on a $400,000 loan, so removing it can significantly improve your monthly cash flow. Sometimes your existing servicer will remove PMI without a full refinance if you request a new appraisal — ask first before going through the full refi process.
Debt consolidation math
If you carry $30,000 in credit card debt at 22% interest, your monthly interest alone is $550. Rolling that into a cash-out refinance at 6.5% drops the interest on that $30,000 to about $162 per month. The savings are real — but the risk is that you are converting unsecured debt into debt secured by your home. If you do this, the discipline is to not run the cards back up.
Switching from ARM to fixed
If your adjustable rate is about to reset and you want certainty, locking into a fixed rate protects you from future increases. This makes especially good sense if you plan to stay in the home long-term and current fixed rates are close to or below your ARM rate.
Refinancing in New Jersey — what to know
NJ equity position is strong
Home values across New Jersey have risen significantly since 2020. The median sale price for a single-family home is now above $525,000. Over 48% of NJ homeowners are equity-rich, meaning they own at least 50% of their property outright. This puts many homeowners in a strong position for cash-out refinancing or PMI removal.
Property tax escrow changes
When you refinance in NJ, your escrow account resets. Because property taxes are so high here (averaging $9,000+ per year), the new escrow setup can require a significant cushion. This sometimes increases the cash needed at closing or temporarily raises your payment until the escrow stabilizes. We factor this into every refinance analysis so there are no surprises.
Attorney and title costs
NJ refinance closings involve an attorney and new title insurance. These costs are real — typically $2,000 to $3,500 combined — and need to be factored into your break-even analysis. Some lenders offer no-closing-cost refinances where costs are rolled into the rate, which can make sense if your break-even timeline is tight.
Refinancing in Pennsylvania — what is different
No transfer tax on refinances (in most cases)
Good news for PA homeowners: if the name on the title does not change, refinances are exempt from Pennsylvania transfer tax. This eliminates what would otherwise be a significant cost — on a $400,000 loan, the 2% transfer tax would be $8,000. NJ does not charge transfer tax on refinances either, but PA buyers should know this upfront.
Lower property taxes mean different break-even math
Because PA property taxes are lower than NJ, your total monthly payment is typically lower to begin with. This can affect the break-even calculation — the monthly savings from a rate reduction may be smaller in absolute dollars, meaning you need to stay longer to recoup closing costs. We run the numbers specific to your situation.
No attorney required for refinance closing
PA refinance closings are handled by the title company without a mandatory attorney, saving $1,000 to $1,500 in closing costs compared to NJ. This improves your break-even timeline on any refinance.
Common refinance situations
If you purchased in late 2023 or early 2024 when rates peaked, even a moderate drop could save you $200 to $400 per month. We will run the break-even analysis and tell you if the timing makes sense or if waiting for further rate movement is smarter.
Cash-out refinancing is often better than a HELOC for large renovation projects because you get a fixed rate and predictable payment. The key is ensuring the renovation adds value that justifies the increased loan balance. Kitchen and bathroom remodels typically return 60% to 80% of cost in home value.
If your home has appreciated and you have 20%+ equity, yes. First ask your current servicer about PMI removal with a new appraisal (cheapest route). If that does not work, a rate-and-term refinance into a new conventional loan at 80% LTV or lower eliminates PMI entirely.
The math often favors cash-out refinancing over carrying high-interest debt. But we also look at the full picture — are you solving the root cause or just moving the problem? We will model the numbers and give you an honest assessment.
FHA mortgage insurance premium stays for the life of the loan. The only way to remove it is to refinance into a conventional loan. If your credit has improved and you have 20%+ equity, this is usually a smart move that eliminates MIP and often lowers your rate simultaneously.
Frequently asked questions
Typical closing costs range from $4,000 to $8,000 depending on loan size and program. This includes lender fees, title insurance, appraisal, and attorney fees. Costs can be rolled into the loan in most cases.
For a rate-and-term refinance, most programs require 3% to 5% equity. For cash-out, you typically need 20%+ equity (80% max LTV). VA cash-out allows up to 100% LTV for eligible veterans.
Standard refinances take 30 to 45 days. FHA Streamline and VA IRRRL can close in 15 to 21 days due to reduced documentation requirements.
The credit inquiry typically drops your score 5 to 10 points temporarily. Multiple mortgage inquiries within a 14 to 45 day window count as a single inquiry for scoring purposes, so rate-shopping does not hurt you.
Yes. Same requirements as a purchase — 2 years of tax returns showing sufficient income. FHA Streamline and VA IRRRL bypass income verification entirely if you have an existing FHA or VA loan.
Should you refinance? Let us run the numbers.
We will calculate your break-even, compare your options, and give you a clear recommendation — not a sales pitch.