How to Refinance a Mortgage Without Going Broke

by Sue in Portland, by a Real Estate Investor, and by Susan in Alexandria

Ask Kate how to refinance a mortgage without going broke: It's ironic that refinancing a home can be expensive when the intent is to make your mortgage more affordable, whether that means a lower house payment or shorter term. Let's meet three homeowners who are looking for answers to questions about the refinance process.


Sue is refinancing their house from a 15 year term to a 30 year. She wants to know my thoughts and if I think her plan is a good idea. Secondly, real estate investors want to refinance their principal residence but are having a difficult time finding a lender interested in helping them, in spite of their strong qualifications. Susan has a balloon payment due soon.

Refinancing from 15 to 30 Year Home Loan

By Sue in Portland, Oregon
Refinancing from 15 to 30 Year Home Loan

Hi Kate,

We are currently refinancing our house from a 15 year to a 30 year, no increase in interests, both 4.75%, closing costs are covered by a 'lender credit' and out of pocket expenses are $258 for the appraisal.

Other then the escrow that is needed, this is the only addition to the loan, which we will pay into the loan when we get the escrow check back from the other mortgage company.

We are doing this for extra liquid cash to pay off other non-tax deductible debt and get us back on track.

Once we pay off the other debt, the extra is going toward the house.

Is this a good idea? What are your thoughts? Thank you

***zz-portrait-left.shtml*** Ask Kate answers: Refinancing from 15 to 30 Year Home Loan

Hi Sue,

First off, I like that you aren't increasing the balance of your mortgage with excessive closing costs.

I'm also glad you have a plan for getting rid of consumer debt.

Thirdly, the most important principle for homeowners is to get an affordable mortgage payment and that is what you are doing.

So even though you are going (seemingly) backward from a 15 year loan to double the term, you still have a viable plan to pay off your mortgage. I applaud you for that.

All homeowners should have an exit plan like yours. By that, I mean paying off the lender, the true mortgage freedom.

Incidentally, did you know I wrote a book on getting out of debt? Sold on Amazon, you can see it at The Mortgage Freedom Project: Kate Ford's Magical 6-Step System to Paying Off Your House Faster and Easier than You Ever Thought Possible.

Best wishes,


Real Estate Investor Wanting to Refinance Principal Residence

By Real Estate Investor
Real Estate Investor Wanting to Refinance Principal Residence

Hi Kate, I have 13 properties, 11 mortgages, in CA, NV, AZ, and ID.

I want to refinance my principal residence in San Jose, CA, but have a hard time finding a lender who wants to deal with me.

I have excellent credit (757), am employed full-time, my husband is employed full-time. All rentals are positive cash flow.

I just want to take advantage of lower interest rates. Current rate on principal residence is 4.375.

How can I find a lender to help me?

***zz-portrait-left.shtml*** Ask Kate answers: Real Estate Investor Wanting to Refinance Principal Residence

Hi Real Estate Investor,

You have a couple of strikes against you, the first one being that lenders have an innate distrust of anyone with more than two mortgages, even more so when they exceed the latest and greatest limit by Fannie Mae.

But because this is your principal residence, there is still hope. What you need is a loan officer who can think outside the box.

However, mortgage originators know the amount of paperwork involved with submitting your package for loan approval is going to be enormous.

So as you search for a lender who is creative enough to sell an underwriter on approving your loan, it will help to have all of your ducks in a row. Here's a checklist of basic information you will need to give your lender.

Additionally, make sure prospective lenders know that you have steady income on top of the rental properties' positive cash flow and that you do not have any credit issues.

Put together of package of at least two years of tax returns, all pages, including a schedule E. Include copies of the mortgage statement, signed rental agreements, property tax statement, and liability insurance premium.

I'd create a spreadsheet for each property that includes year bought, current value, address, loan number, lender, mortgage balance, principal and interest payment, amount of rent, property taxes, and homeowners insurance.

A lot of work? Yep. But you are trying to remove the loan originator's objection to taking on your project. This package that you assemble becomes your selling point.

Once you are ready, you can follow these 6 steps for comparing mortgage lenders, originators, and interest rates. Good luck!

Best wishes,


Refinancing 1st and 2nd Mortgages to Avoid Balloon

By Susan in Alexandria, Virginia
Refinancing 1st and 2nd Mortgages to Avoid Balloon

Hi Kate:

I purchased my condo in 2004 with an ARM that has adjusted three times downward - currently at 3% and a HELOC with a balloon payment due next year of $25K. I owe approximately $195K on the first mortgage.

I am considering refinancing into one fixed rate for 30 years at 4.5%. The closing cost is approximately $5500 for the loan. I don't know how long I'll be in this condo -- the new rate is approximately the same as what I was paying before the refi with the two loans.

I know I will pay more in interest and with closing costs. Does it make sense to refinance into a fixed loan at this point? Are there other options?

A shorter term loan (15 year) is more than I can comfortably handle. Thanks.

***zz-portrait-left.shtml*** Ask Kate answers: Refinancing 1st and 2nd Mortgages to Avoid Balloon

Hi Susan,

It's the $25,000 balloon payment that concerns me. How will you address it if you don't refinance?

Get out your final mortgage paperwork to see if there are alternatives to paying the balloon.

Read more about preparing for balloon payments at Caught in a Balloon Payment by Tina S from Coatesville, PA.

Otherwise, unless you are going to sell the house before the balloon matures or have sufficient savings to pay it in full, refinancing might make sense.

But since you do not know how long you will remain in this house, try to get as close to a no cost refinance as possible. Read more about this option at Mortgage Refinancing at No Cost for more help.

Best wishes,



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To avoid foreclosure the bank said that I can make settlement offer.
by: Keith from Toledo, OH

Because I am now over 90 day past due on the balloon payment, the bank said I can make a settlement offer. I want to know what a reasonable settlement amount would be.

I owe $123,000 the house appraised for $152,000. I have cash available of around 92k.

It's odd I can get loan approval to purchase a new home but unable to get approval on the refinancing the house I live in because of the past due status, I did go through a bankruptcy but never missed a payment except for the balloon.

Hi Keith, Kate here...

I am impressed the bank initiated a settlement offer and asked you for an amount. Nice!

On the flip side, it puts you in the position of not wanting to offer too little nor wanting to give away the house (excuse the pun).

I have no idea what the right amount to offer would be but hopefully the bank is willing to go back and forth a bit in the negotiations.

One thing I would definitely suggest is to have an attorney peruse the fine print before you give the bank any cash. Case in point: Chris's lender asked for $40,000 to remove his PMI. But after the bank cashed his check, well you have to read it to believe it... Getting Rid of PMI - Not!

Best wishes, Kate

P.S. Yep, banks are more willing to take chances on a home purchase mortgage compared to a refinance of an existing loan. They have insisted for many years that statistics point to a greater chance of foreclosure after a refi.

Click here to add your own comment.

You can also ask Kate about your mortgage at How to Find Your Mortgage Lender.

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