Refinancing a Conventional Loan with Intention

A conventional refinance allows homeowners to replace an existing mortgage with a new conventional loan—often to reduce interest costs, improve cash flow, or access equity. When structured intentionally, a conventional refinance can strengthen both short-term affordability and long-term financial planning.

Rate-and-Term Conventional Refinance

A rate-and-term refinance adjusts your interest rate, loan term, or both without pulling cash out of your home’s equity. These loans follow guidelines set by Fannie Mae and Freddie Mac and are commonly used to improve payment structure or reduce long-term interest.

Why Borrowers Choose a Rate-and-Term Refinance

• Lower interest rate or monthly payment
• Shorten loan term to build equity faster
• Extend loan term to improve monthly cash flow
• Convert from an adjustable-rate to a fixed-rate mortgage
• Eliminate private mortgage insurance (PMI) when eligible

Typical Rate-and-Term Guidelines

• Credit score: Typically 620+ (higher scores receive better pricing)
• Appraisal: Required
• Loan limits: Subject to conforming loan limits
• Mortgage insurance: May be removed with sufficient equity
• Occupancy: Primary residences, second homes, and investment properties (guidelines vary)

Cash-Out Conventional Refinance

A cash-out refinance allows homeowners to access a portion of their home equity by refinancing for more than the existing loan balance. This option can provide liquidity for strategic uses while maintaining a single mortgage payment.

Why Borrowers Choose a Cash-Out Refinance

• Fund home improvements or renovations
• Consolidate higher-interest debt
• Build liquidity or reserves
• Invest in additional real estate or business opportunities
• Pay for major life expenses

Typical Cash-Out Guidelines

• Equity: Maximum loan-to-value limits apply
• Credit score: Typically higher requirements than rate-and-term
• Appraisal: Required
• Loan limits: Subject to conforming limits
• Mortgage insurance: May apply depending on equity
• Occupancy: Guidelines vary by property type

Rate-and-Term vs Cash-Out — What’s the Difference?

• Rate-and-term refinance focuses on optimizing the loan structure
• Cash-out refinance prioritizes liquidity and strategic access to equity
• The right option depends on goals, timeline, and risk tolerance

Standard Guidelines for a Conventional Refinance

Conventional refinance guidelines are established by Fannie Mae and Freddie Mac and may vary based on occupancy, loan type, and borrower profile. While exact requirements depend on the scenario, the following represent common baseline standards.

Credit & Income

• Minimum credit score: Typically 620+
• Debt-to-income ratio: Generally capped around 45–50%, depending on profile
• Stable income and employment required

Equity & Loan-to-Value (LTV)

• Rate-and-term refinance:
  • Often up to 97% LTV for primary residences
• Cash-out refinance:
  • Typically capped around 80% LTV for primary residences
  • Lower limits may apply for second homes and investment properties

Property & Occupancy

• Eligible for primary residences, second homes, and investment properties
• Appraisal required to determine current market value
• Property must meet standard condition and appraisal guidelines

Mortgage Insurance (PMI)

• Required if loan exceeds 80% LTV
• May be removed with sufficient equity
• PMI removal is a common reason borrowers refinance

Loan Limits

• Subject to conforming loan limits, adjusted annually
• Higher limits may apply in designated high-cost areas

Evergreen 360 Perspective on Conventional Refinancing

A conventional refinance should support more than just today’s payment. Through the Evergreen 360 framework, we evaluate how refinancing impacts your Income, Growth, Protection, and Legacy pillars—ensuring your mortgage works in harmony with the rest of your financial plan.

Is a Conventional Refinance Right for You?

The right refinance depends on your goals, equity position, and broader financial picture—not just current rates. We help you determine whether a rate-and-term or cash-out refinance best supports where you are today and where you’re headed next.