Mortgage Refinance

Yes, but not permanently. When applying for a mortgage refinance, lenders will pull your credit report and perform a hard inquiry, which registers that you are seeking to take on debt. This can lower your credit score by a few points for up to one year and stay on your credit report for up to two years.

The process of refinancing a mortgage may vary depending on various factors, such as the lender's timeline and your financial situation. DHL loans typically go from application to funding in an average of 5-7 weeks.

Refinancing your home mortgage allows you to pay off your original mortgage with a new loan. Typically, people refinance their original mortgage loan for one or more reasons:
 

• to earn a better interest rate,
• to convert a variable rate to a fixed rate (or vice-versa),
• to reduce monthly payments by extending the repayment term of the loan, or
• to reduce interest charges paid over the life of the loan by reducing the repayment term of the loan.

Our mortgage refinance calculator lets you find out how much you may be able to save every month by refinancing your existing mortgage. The calculator may help you decide whether a mortgage refinance is a good option in your circumstances.

A cash out refinance is when you take a portion of your home's equity out as cash when refinancing your current mortgage. While a traditional refinanced loan will only be for the amount that you owe on your existing mortgage, a cash out refinance loan will increase the amount of the loan, allowing you to both pay off your existing mortgage and take a lump-sum payment in cash for the additional amount of the loan. 

When mortgage rates are low, a cash out refinance may be advantageous over other types of credit like credit cards, personal loans, or HELOCs that have a variable rate.

Cash out refinance loans from Discover have low, fixed rates that won't change over the life of the loan, as well as no cash due at closing.

Typically, lenders will use the combined loan-to-value (CLTV) ratio to understand your ability to take on new debt. To generate your CLTV on your own, follow these steps:
 

• Add up the balances on all your existing home loans, such as first mortgages, second mortgages, or home equity lines of credit. This is your combined loan value.
• Find the estimated value of your home. You can use an online tool, compare the sale price of similar homes in your neighborhood, or pay for an official estimate.
• Divide your combined loan amount by your estimated home value to calculate your current CLTV.
   

Once you know your current CLTV, you need to find out the maximum CLTV allowed by your cash out refinance lender. Many lenders will cap any lending at 80% of your CLTV, but Discover allows for loans up to 90% of CLTV. Use your lender's maximum CLTV percentage and multiply that by your current home's value to calculate your maximum loan amount. When you subtract your existing mortgage balance from your maximum loan amount, you will see how much cash you may be able to obtain through a cash out refinance.

Let's use the following example to walk through calculations for a cash out refinance (you can substitute your home's values in the calculations below or use our cash out refinance calculator):
 

• A homeowner owes $100,000 on a first-lien mortgage loan and $45,000 on a second-lien home equity loan.
• The current home value is $400,000.
• The combined loan amount is $100,000 + $45,000 = $145,000.
• The current CLTV is $145,000 / $400,000 = 36%.
   

With Discover, homeowners can borrow up to 90% CLTV, so 0.90 x $400,000 = $360,000 may be able to be taken out against the current value of the home. In this example, since $145,000 is owed on existing loans, the maximum cash out value possible with a Discover loan is $360,000 - $145,000 = $215,000. While borrowers do not have to take out the full amount available, finding these values may help homeowners understand borrowing limits before applying for a loan.