Refinance in New Mexico

Your mortgage loan isn’t a permanent commitment. If your loan is no longer working for you, a refinance can help you better manage your payments without moving out of your home. 

Get started with our guide to refinance in New Mexico.

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Best Refinance Lenders in New Mexico 

What’s the best place to refinance in New Mexico? The answer may vary depending on your needs and how you want to refinance. If you aren’t sure where you’d like to refinance your loan, consider a few of our top picks below. 

Current New Mexico Refinance Rates

When you refinance your mortgage loan, you’ll accept a new interest rate in line with current market rates. This can be beneficial if rates are lower now than when you applied for your loan. It can also mean paying more for your loan if rates are higher now.

Before you apply for your refinance, check your most recent mortgage statement and know your interest rate. Compare your rate to current market rates in New Mexico. If rates are higher now, you might want to hold off on refinancing until local market rates drop. 

Refinance Process

Refinancing your mortgage loan doesn’t need to be stressful or difficult. Knowing what to expect can make the process less scary. Your mortgage loan refinance will probably include the following 5 steps.  

Decide Which Type of Refinance You Need

Before you begin your refinance, you need to decide how you want to refinance. There are 2 major types of mortgage refinances:

• Rate and term refinance. When you refinance your rate or term, you change the amount of time you have to pay off your loan or you adjust your interest rate. You can refinance to a longer term or a shorter term depending on your needs. Adjusting your loan’s rate or term also changes your monthly payment.
• Cash-out refinance. When you take a cash-out refinance, your lender gives you a portion of your home equity in cash after you close. In exchange, you accept a loan with a higher principal balance. Think of a cash-out refinance as an affordable personal loan you can use to consolidate debt, pay off outstanding bills or fund a home renovation project.

You can also refinance to change your loan type. For example, you may want to refinance from an FHA loan to a conventional loan to secure a lower interest rate. 

Choose Your Lender

Once you know what you need from your refinance, it’s time to choose a lender that offers the type of loan you want. Not every lender in New Mexico offers every type of loan, so don’t be afraid to explore multiple lending options. Some qualities you might want to consider when you shop for lenders include:

• Application process. If you need to close quickly, you might want to choose a lender with a streamlined refinance application process like the Quicken Loans® Rocket Mortgage® platform.  
• Convenience. If you work with an online mortgage lender, you’ll likely be able to complete your entire application in a few minutes. If you choose a local lender, you’ll have in-person assistance at a branch location.
• Customer service. Refinancing can be stressful. Look for a company with extended customer service options if you’re still nervous about the refinance process.  

Submit Your Application

After you choose a lender, submit your application for a refinance. Your lender might ask you for financial documentation like bank statements and pay stubs, so be prepared with at least 2 months of statements and paychecks. The best refinance mortgage companies will return a decision within a few days. In many cases, you’ll receive an approval instantly when you apply online.

Get an Appraisal 

After you apply for your refinance, your lender will underwrite your loan and verify your financial information. Your lender will also assist you in scheduling a new home appraisal, which is required for most refinances.

As the homeowner, you can attend your home appraisal when you refinance. Be sure to straighten up and make any last-minute repairs before your appraisal date arrives. If you’ve made permanent improvements to your property since moving in, prepare a list of upgrades for your appraiser. These steps can help improve your evaluation. 

Close on Your New Loan

After your appraisal and underwriting close, your lender will send you a document called a closing disclosure. Your closing disclosure contains details on the final terms of your loan, including your new interest rate, term and any cash you’re taking out of your property. Remember to acknowledge you’ve received your closing disclosure — your closing meeting can’t be scheduled until you do.  

Your lender will schedule a closing meeting at least 3 days after you receive your closing disclosure. At closing, you’ll sign on your new loan and pay your closing costs. Be sure to bring the following:

• A government-issued photo ID
• Your closing disclosure
• A cashier’s check or proof of funds transfer for your closing costs
• A list of key contacts involved in your refinance, such as your lender or attorney 

If your lender owes you money (like during a cash-out refinance), you won’t receive it at closing. This is because your lender is legally obligated to give you at least 3 business days to cancel the refinance under the Truth in Lending Act. You’ll receive your funds 3 to 5 days after your closing meeting.

When Should You Refinance in New Mexico?

There are plenty of reasons why you might benefit from a refinance, including:

• A lower monthly payment. If you’re having trouble making your monthly loan payments, consider refinancing to a longer term. Increasing your mortgage term lowers your monthly payment by spreading your principal balance over a larger number of months.  
• A lower interest rate. Are interest rates lower now than when you got your loan? If they are, refinancing may allow you to unlock a lower monthly payment — and save you thousands of dollars by the time you pay off your loan.
• No FHA insurance. If you have an FHA loan, you must pay FHA loan insurance every month. You can’t cancel your FHA insurance so long as you have an FHA loan. However, you may remove the insurance requirement by refinancing to a conventional loan when you have at least 20% equity in your home.
• Pay off high interest debt. Credit card debts and personal loan debts have much higher interest rates than mortgage loans. If you have debt you need to pay down, you can often save money by consolidating what you owe with a cash-out refinance. 

When Should You Not Refinance?

Refinancing isn’t right for everyone. Below are some reasons why you might not want to refinance.

• You don’t have 20% equity in your home with an FHA loan. If you refinance from an FHA loan to a conventional loan with less than 20% equity, your lender will require you to pay for private mortgage insurance (PMI). PMI is more expensive than FHA insurance — so be sure to check your equity before you refinance.
• You’re planning a move. If you plan on moving out of your property within the next few years, you might end up paying more in closing costs than you save with your refinance.
• You don’t have enough equity to accomplish your goals. Your lender will not allow you to take all of your built equity out of your home. Most lenders limit cash-out refinance applicants to deducting 80% to 90% of current equity. If your loan is new, you might not have enough equity in your property to justify your refinance. 

Bad Credit Refinance

If you have bad credit, you might have a more difficult time getting a refinance. Even the best mortgage company will put a heavy emphasis on credit when you apply for your loan. This is because if you have a lower score, you’re statistically more likely to miss loan payments. However, refinancing with bad credit isn’t impossible.

One of the 1st options to consider when you need to refinance a mortgage with bad credit is a streamline refinance. Streamline refinances are abbreviated versions of the full refinance process that allow you to take on a new loan without a credit check or home appraisal. Streamline refinances are only available for FHA loans, and you must have a history of on-time payments before you can qualify.

The VA version of the streamline refinance is the VA interest rate reduction refinance loan — or VA IRRRL. Like an FHA streamline, you can qualify for a VA IRRRL without an appraisal or credit check. You must already have a VA loan and have made your past 6 mortgage payments on time before you can get a VA IRRRL. There must also have been at least 270 days from the date you closed on your original loan.

If you don’t have a government-backed mortgage, you might want to consider applying for a refinance with a non-occupying co-client. A non-occupying co-client is someone who doesn’t live in your home but agrees to take financial responsibility if you fail to repay what you owe. Be 100% sure you can make your monthly payments before you ask a friend or family member to be a co-client on your refinance. If you miss even 1 payment, your lender can go after your co-client for the balance.

It’s important to know you can only qualify for a rate or term refinance when you have bad credit. You can’t use a streamline refinance or a co-client to help you get a cash-out refinance. If you need to take cash out of your home equity, you must have a credit score of at least 620 points. 

Refinance With Confidence 

Do your homework to save both time and money on your refinance. Research and meet with a variety of lenders in your area, explore all of your loan options and know your current equity if you plan to take cash out of your home. Just a few days of research can help you refinance with confidence and save thousands of dollars.