Refinancing Overview for Tennessee Homeowners

Why refinance?

There are several legitimate reasons to refinance, and the right reason depends on your situation:

• Lower your interest rate: If rates have dropped since you got your loan, refinancing can reduce your monthly payment and total interest paid over the life of the loan.
• Shorten your loan term: Refinancing from a 30-year to a 15-year mortgage increases your monthly payment but dramatically reduces total interest paid and builds equity faster.
• Remove mortgage insurance: If your home has appreciated and you now have 20% equity, refinancing to a conventional loan can eliminate FHA mortgage insurance.
• Access equity: A cash-out refinance lets you borrow against your home's equity for home improvements, debt consolidation, or other purposes.
• Change loan type: Convert from an adjustable-rate to a fixed-rate mortgage for payment stability, or vice versa.
• Remove a borrower: After a divorce or other life change, refinancing can remove a co-borrower from the loan.

The break-even calculation

Every refinance has closing costs — typically 2–4% of the loan amount. To determine whether refinancing makes financial sense, calculate your break-even point: how long it takes for the monthly savings to recoup the closing costs.

Example: If refinancing costs $6,000 and saves $200/month, your break-even is 30 months. If you plan to stay in the home longer than 30 months, refinancing makes sense. If you expect to sell or refinance again before then, it may not.

Use the Refinance Break-Even Calculator to run your own numbers.

Refinance options

Qualification requirements

Refinancing requires the same basic qualification as a purchase: credit review, income verification, and an appraisal (in most cases). The main difference is that you already own the property, so there's no purchase contract or seller involved. The process typically takes 30–45 days from application to closing.