Refinance in Rhode Island

As your financial situation changes over time, your mortgage loan needs may also shift and change. A refinance can help you manage your monthly mortgage payments while also staying in the home that you love. If you’re thinking about applying for a refinance in Rhode Island, be sure to read our complete guide to refinancing and the best places to refinance a mortgage before you dive in. 

Refinance Calculator

Best Refinance Lenders in Rhode Island

From Quicken Loans’ streamlined Rocket Mortgage platform to highly rated VA loan refinances from Veterans United, buyers in Rhode Island have plenty of refinance options. If you aren’t sure where you want to refinance, consider a few of our top choices below. 

Current Rhode Island Refinance Rates

When you refinance a mortgage loan, your lender will offer you a new interest rate. The interest rate you pay will be heavily influenced by current market rates, which go up and down over time. Your local housing market, current bond interest rates and even the current state of the overall economy can all play a role in what you pay for your refinance.

Before you apply for a refinance, take some time to track how mortgage rates in your area are changing. Here’s a sample of what you might expect to pay for your loan if you took it out today.

Refinance Process

Most refinance lenders have a very similar refinancing process. Whether you choose a local bank or an online mortgage lender to service your refinance, expect to go through the following 5 basic steps.  

Step 1: Lay Out Your Goals

Before you submit your application to refinance, you need to decide which type of refinance you want. There are 2 major types of refinances:

• Rate or term refinance: Rate or term refinances mean you’ll adjust your mortgage interest rate or change the number of months you have to pay off your loan. If you take a longer mortgage term, your monthly payment decreases. If you take a shorter term, your monthly payment increases, but you pay less in interest over time. If you refinance only your mortgage rate, you’ll accept a rate that’s on par with current average rates in your area.
• Cash-out refinance: If you take a cash-out refinance, you accept a loan with a higher principal balance. After your refinance closes, your lender offers you the difference in cash. For example, if you have a mortgage loan with a $150,000 balance and you need $10,000, your lender would give you a loan worth $160,000 and $10,000 in cash after closing.

Use a mortgage amortization calculator to determine what you can afford to pay each month and what you’d like to get out of your refinance before you apply. 

Step 2: Choose a Lender and Apply

Many homeowners refinance their mortgages with the same company that serviced their original loan. However, if you’re unsatisfied with your current lender or your lender doesn’t offer the type of loan you need, you can refinance with a new one. Explore lender options in your area or check out our top lenders above before you decide which company is right for you.

When you find the lender you want to work with, apply for a refinance loan. Most lenders now allow you to apply for a new loan completely online but you might have the option to apply in person if you choose a local branch. Your lender will usually ask you for financial documentation when you apply for your loan, including:

• Your 2 most recent bank statements
• Your 2 most recent W-2 forms
• Your 2 most recent pay stubs

If you’re self-employed, you might need to provide your full tax return from the previous year. 

Step 3: Lock In Your Rate

The best refinance mortgage companies will return a refinance decision to you within a few days of applying. In many cases, you’ll receive a Loan Estimate instantly after you submit your application.

Your lender will usually offer you the option to lock in your interest rate while the underwriting process is going on. If you’re satisfied with the rate you receive on your Loan Estimate, it’s usually a good idea to lock it in.  

Step 4: Appraisal and Underwriting

As soon as you apply for your refinance, your lender will begin underwriting your loan. During underwriting, your lender will verify your financial information, check your credit and prepare your loan paperwork.

Your lender will also order a new appraisal in most cases. Unlike when you originally bought your home, you’re now free to attend your appraisal. If you’ve made permanent upgrades to your home since you moved in, you might want to create a list of renovations and additions for your appraiser. 

Step 5: Close on Your Loan

After refinancing closes, your lender will send you a Closing Disclosure with the final terms of your loan. Acknowledge your Closing Disclosure with your lender and proceed to closing.

At closing, you’ll sign on your new loan and ask any last-minute questions for your lender. Be sure to bring your ID, Closing Disclosure and proof of transfer for your closing costs to your closing meeting. 

When Should You Refinance in Rhode Island?

There are many reasons why you might need to apply for a refinance. Some of the benefits of refinancing may include:

• Taking on a more manageable mortgage payment: If you miss monthly payments on your loan you can quickly fall into foreclosure. Refinancing to a longer mortgage term lowers what you owe each month, which can make managing your loan easier.
• Paying off high-interest debt: Many homeowners take a cash-out refinance when they need to pay off high-interest debt like student loan or credit card debt because mortgage loans often have lower interest rates. Depending on current market rates and the kind of debt you’ve incurred, you might end up paying up to 10 percentage points less in interest when you consolidate your debt into your mortgage.
• Locking into a lower interest rate: Finding the lowest possible mortgage interest rate for your loan can mean thousands of dollars saved by the time you own your property in full. If you locked into your loan when rates were high, you may want to refinance when rates are lower.  

When Should You Not Refinance?

Even when you’re working with the best mortgage company, refinancing isn’t always the best solution. Let’s take a look at a few situations in which you might not want to refinance.

• Your loan is new. In order to take cash out of your home equity, you need to already have a significant amount of equity built in your property. If your loan is new, you might not have enough equity to justify taking a cash-out refinance.
• You can’t afford closing costs. If you cannot afford your closing costs, your lender might offer to roll them into the principal balance of your loan with a no-closing-cost refinance. However, this option usually comes with a higher interest rate and is significantly more expensive in the long term than just paying your closing costs upfront. Wait until you can afford to pay your closing costs before refinancing.
• You plan on selling your home soon. If you plan on selling your home within the next few years, you could end up paying more in closing costs than you save by refinancing. 

Bad Credit Refinance

One of the first things your lender will look at when you apply for a refinance is your credit profile. If a lender sees that you have a poor credit score, it might assume that you have a history of borrowing too much money or mismanaging your credit. This can make it harder to find a lender that fits your needs.

There are a few options that you can use to refinance with a bad credit score. First, consider an FHA streamline refinance or a VA interest rate reduction refinance loan (VA IRRRL). Both the FHA streamline and the VA IRRRL allow you to refinance without getting a new appraisal or credit check. This can offer an ideal solution for homeowners who have a government-backed FHA or VA loan who want to refinance their rate or term with bad credit.

If you don’t already have an FHA loan or a VA loan, you cannot refinance with a streamline or VA IRRRL. However, you might be able to refinance with a non-occupying co-client. A non-occupying co-client is someone who you add to your loan but who doesn’t live on your property. If you add a non-occupying co-client to your loan, you can use his or her credit to justify your refinance. However, if you fail to pay back your loan, your lender can pursue the co-client for your missed payments. Be 100% positive you’ll be able to manage your new loan before asking a co-client to sign onto your refinance. 

Refinancing in Rhode Island

Refinancing your mortgage loan can provide you with tons of benefits, especially if your financial situation has changed since you got your loan. However, refinancing isn’t free — you might end up paying thousands of dollars in closing costs by the time you factor in all of your expenses. Like any type of mortgage commitment, carefully weigh the pros and cons before you apply for a refinance.