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What Is a Conventional Refinance?

A conventional refinance is the process of replacing your existing mortgage with a new conventional loan to improve your financial position. It can be used to refinance out of an FHA loan, VA loan or USDA loan or to update the terms of your current conventional mortgage. The goal is usually to secure a lower interest rate, reduce your monthly payments, remove private mortgage insurance (PMI) once your loan-to-value (LTV) ratio reaches 80 percent or access your home equity through a cash-out refinance.

Benefits of a Conventional Refinancing

Refinancing into a conventional home loan can strengthen your long-term financial position in several measurable ways:

Lower your rate, lower your payment: If your current mortgage rate is higher than today’s conventional refinance rates, refinancing can help you save every month. You’ll enjoy smaller monthly mortgage payments and pay less interest over the life of your loan.

Pay off high-interest debt: Use a cash-out refinance to turn your home equity into cash and pay off high-interest credit cards, personal loans or medical bills. One simple, lower-rate payment can free up your budget fast.

Fund home improvements: Need a remodel or new roof? You can use your home equity to finance renovations without adding new credit cards or personal loans. A fixed-rate refinance keeps your payments predictable while upgrading your space.

Remove PMI once eligible: As your home’s value grows, you may be able to drop private mortgage insurance (PMI) when your loan-to-value (LTV) reaches 80% or less, saving you extra every month.

Switch from FHA, VA or USDA to conventional: Tired of ongoing mortgage insurance or VA funding fees? Refinancing into a conventional home loan can eliminate those costs and give you more flexibility moving forward.

1. Fixed-Rate Refinance Loan

A fixed-rate refinance loan keeps your interest rate the same for the entire loan term, ensuring predictable monthly payments that never fluctuate with market conditions.

Borrowers can typically choose 15-, 20- or 30-year terms, balancing the size of the payment with the total interest paid over time.

This option is best for homeowners who plan to stay in their property long-term, prefer payment stability, and want protection against rising rates.

2. Adjustable-Rate Mortgage (ARM) Refinance

An adjustable-rate mortgage refinance starts with a fixed interest rate for a set introductory period, commonly 5/6, 7/6 or 10/6 after which the rate adjusts periodically based on a financial index and margin.

This structure often provides a lower initial rate than a fixed loan, making it appealing for borrowers who expect to move or refinance again before the adjustment period begins.

ARM refinances can be a strategic short-term solution, especially for borrowers with strong credit approval and manageable debt-to-income ratios, but it’s important to understand how rate adjustments may affect your future monthly mortgage payment.

3. Conventional Cash-Out Refinance

A conventional cash-out refinance allows you to increase your loan amount above your current mortgage balance and receive the difference as cash.

Homeowners often use this option to consolidate high-interest debt, fund home improvements, cover college tuition or manage other major expenses.

Because it taps into your home equity, lenders review your loan-to-value (LTV) ratio, credit score and income to determine eligibility.

Eligibility Criteria for a Conventional Refinance

Qualifying for a conventional refinance loan depends on how your home equity, credit score, and debt-to-income ratio (DTI) align with lender guidelines. Meeting these benchmarks improves your chance of mortgage approval and better refinance rates.

Home Equity / Loan-to-Value (LTV): You can refinance with as little as 5% home equity, though reaching 80% LTV or lower allows you to remove private mortgage insurance (PMI) and secure lower interest rates.

Credit Score: A strong credit score signals repayment reliability and may qualify you for reduced annual percentage rate (APR) and better loan terms on both rate-and-term and cash-out refinance programs.

Debt-to-Income Ratio (DTI): Most lenders prefer a DTI under 45%, ensuring your income comfortably supports the new monthly mortgage payment and other obligations.

Property Type & Occupancy: You can apply for a conventional mortgage refinance on a primary residence, second home or investment property. Rates and eligibility may differ depending on how the property is used.

Requirements & Documentation

Once you meet basic eligibility, lenders verify your information to finalize loan approval and calculate exact closing costs and APR.

1. Required Documents:

Be prepared to submit proof of income, employment, and assets, along with your credit report and existing mortgage statement.

2. Appraisal & Underwriting:

An updated home appraisal confirms property value and loan-to-value ratio (LTV). The underwriting process then reviews your credit profile, DTI and loan purpose, whether it’s a fixed-rate refinance or cash-out refinance.

3. Closing & Loan Term:

After approval, you’ll review closing costs, discount points, and your final loan term before signing. Most mortgage refinance loans close within a few weeks once documentation is complete.

Borrower reality check: Extending the loan term can reduce the monthly mortgage payment but may increase total interest over the life of the new loan.

When a HELOC Mortgage Might Be Better Than Refinancing?

If your current mortgage has a much lower interest rate than the market, a home equity line of credit (HELOC) can help you unlock your home equity without touching that first mortgage.

Instead of starting over with a full mortgage refinance, you can open a HELOC for the exact amount you need, preserving your existing rate and avoiding unnecessary closing costs.

A HELOC is a revolving credit line that gives you the flexibility to borrow, repay, and borrow again as your needs change. You only pay interest on the balance you actually use, keeping your monthly payments manageable and your total loan costs lower.

This makes a HELOC ideal for:

Home improvements or renovations that boost property value
Smaller cash needs such as tuition, medical bills or debt consolidation
Borrowers who want to keep their fixed-rate first mortgage intact

HELOC Options from Truss Financial Group:

1. Truss Digital HELOC
A fully online, no appraisal HELOC program with no tax returns required for qualifying borrowers. Ideal for fast approvals and flexible credit access up to $750,000.

2. Truss Equity Select
Designed for seniors 55+, this program offers capped payments, non-recourse protection, and long-term stability while accessing equity safely.

Learn More About HELOC

how the process of conventional laon refinance works

1. Rate Alerts & Discovery

Start by signing up for rate alerts to monitor real-time conventional refinance rates. During this step, we help you determine your loan purpose, whether you’re looking for a rate-and-term refinance to lower your monthly mortgage payment or a cash-out refinance to access home equity for other financial goals.

2. Application

Once you’re ready, your loan officer pulls your credit report and helps gather key documents such as income statements, bank records, and asset verification. You can also use our mortgage refinance calculator to estimate savings, closing costs, and your potential monthly payments.

3. Underwriting

Our underwriting team reviews your credit profile, debt-to-income ratio (DTI), and loan-to-value (LTV) to confirm eligibility. If an appraisal is required, it will be ordered to verify your home value. This stage ensures the refinance loan aligns with lending guidelines and your financial stability.

4. Approval & Closing

Once approved, you’ll receive your loan estimate, outlining discount points, annual percentage rate (APR), and final closing costs. You can then schedule your closing date, review all documents, and sign your new conventional refinance loan agreement.

5. Post-Close

After closing, your new mortgage begins servicing. You’ll receive details about your first payment date, escrow setup, and PMI removal if your loan-to-value ratio is 80% or less.

Conventional Refinance vs. FHA Streamline vs. VA IRRRL

Feature	Conventional Refinance	FHA Streamline Refinance	VA IRRRL (Streamline)
Loan Type	Replaces your existing mortgage with a new conventional loan	Refinances a current FHA loan	Refinances a current VA loan
PMI / MIP	Private mortgage insurance (PMI) can be removed once loan-to-value (LTV) ≤ 80%	Mortgage insurance premium (MIP) applies for life of the loan	VA funding fee may apply depending on eligibility
Credit / Docs	Requires full credit approval and full documentation of income, assets, and employment	Reduced documentation and simplified credit check	Reduced documentation and streamlined credit review
Cash-Out	Available through a conventional cash-out refinance (subject to LTV limits)	Limited cash-out allowed	Limited cash-out allowed
Best For	Borrowers who want to remove PMI, take cash out, or lock a lower interest rate	Borrowers seeking FHA-to-FHA simplicity without full underwriting	Borrowers seeking VA-to-VA simplicity and faster approval

How Much Does It Cost to Refinance Your Mortgage?

Understanding the real cost of a conventional refinance goes beyond just comparing the interest rate. The annual percentage rate (APR) reflects the true borrowing cost, since it includes discount points, closing costs, and other lender fees.

Interest Rate vs. APR: The interest rate affects your monthly payment; the APR shows the total cost, including discount points, closing costs, and lender fees.

Closing Costs & Breakeven: Expect 2%–5% of the loan amount in closing costs. Your breakeven point is how many months it takes for your lower payment to offset those costs.

Prepaids & Cash to Close: Prepaid interest, property taxes, and home insurance escrows aren’t extra costs, they’re simply moved into your new mortgage refinance account.

Frequently Asked Questions:

Can a conventional loan be refinanced?

Yes, you can refinance an existing conventional loan to secure a lower interest rate, change the loan term, remove private mortgage insurance (PMI) once you reach 80% loan-to-value (LTV) or complete a cash-out refinance to access home equity.

At Truss Financial Group, we tailor refinance programs to fit your financial goals, from rate-and-term refinances to cash-out options for debt consolidation or home improvements.

How much does it cost to refinance a conventional loan?

Expect standard closing costs and any optional discount points you choose to buy down your rate. Your annual percentage rate (APR) reflects the full cost of borrowing, including lender fees. Truss provides transparent, itemized estimates before you lock your loan so there are no surprises at closing.

How soon can you refinance a conventional loan?

There’s often no minimum waiting period for a rate-and-term refinance, but cash-out refinances may require a short seasoning period, depending on your loan type and equity position. Our team reviews your current mortgage balance and eligibility to confirm when you can refinance without penalty.

What is a conventional rate-and-term refinance?

A rate-and-term refinance replaces your current mortgage with a new conventional loan designed to lower your interest rate, adjust your loan term or both. There’s no cash out involved, just a smarter structure for long-term savings and lower monthly payments.

How to qualify for a conventional refinance?

Lenders evaluate your credit score, debt-to-income (DTI) ratio, loan-to-value (LTV), and property type. Truss streamlines this process by reviewing your full profile, income, assets, home equity, and refinance purpose, to determine whether a rate-and-term or cash-out refinance suits you best.

Do I have to wait 6 months to refinance my mortgage?

Not necessarily. Some loans can be refinanced immediately, while others, especially cash-out refinances, require up to six months of on-time payment history. Truss confirms your loan approval path and guides you on when to refinance for optimal terms.

What is the "2% rule" for refinancing?

It’s an old guideline suggesting you refinance when your mortgage rate drops by roughly 2%. In practice, Truss recommends using a breakeven analysis, comparing monthly savings to closing costs, to decide if refinancing truly benefits you.

Can I refinance out of an FHA loan to conventional?

Yes, many homeowners refinance from FHA to conventional loans once their LTV reaches 80% or less, eliminating permanent mortgage insurance premiums (MIP). Truss helps you calculate your home equity and see if a conventional refinance can reduce your total monthly payment.

Cash-out refinance vs HELOC, which is better?

It depends on your current mortgage rate and goals. If your existing rate is high, a cash-out refinance may reset your loan at a lower rate while providing cash. If your first mortgage already has a low rate, a HELOC, such as our Truss Digital HELOC or Truss Equity Select, can give you access to funds without refinancing the original mortgage. Both offer flexibility, but the HELOC is better for smaller, flexible cash needs.

How long do you have to wait to refinance a conventional loan?

You can refinance most conventional loans almost immediately if you’re simply lowering your rate or changing your term. For cash-out refinances, most lenders, including Truss Financial Group, require a short six-month ownership or payment history before approving the new loan. This ensures your credit, income, and property value remain stable. If you recently purchased or refinanced your home, Truss can verify the earliest date you qualify for a new refinance.

How Much Equity Do I Need to Refinance to a Conventional Loan?

You can refinance with as little as 5% home equity, but if your loan-to-value exceeds 80%, PMI will apply. To remove PMI, your LTV must be 80% or lower, a threshold Truss monitors for clients looking to eliminate extra monthly costs.

Can I use a Conventional Refinance to Consolidate Debt?

Yes, a conventional cash-out refinance lets you tap into your home equity to pay off high-interest debt, such as credit cards or personal loans. By consolidating under a lower mortgage rate, you can reduce your total interest payments and improve monthly cash flow.

How Can a Conventional Refinance Lower My Payment?

Refinancing can lower your monthly mortgage payment by reducing your interest rate, extending your loan term or removing PMI. Truss helps calculate your payment savings and breakeven timeline before you lock your rate.

Is a Conventional Refinance Different From an FHA Streamline?

Yes, an FHA Streamline Refinance can only be used on FHA loans and requires less documentation but retains MIP. A conventional refinance is open to any loan type and allows you to remove mortgage insurance at 80% LTV or below, often providing more flexibility in loan terms and equity use.

Can I Get a Conventional Refinance on an Investment or Second Home?

Yes, unlike FHA or VA refinances, conventional refinance loans can be used for second homes and investment properties. The Truss team helps structure these loans based on your occupancy type, income documentation, and LTV requirements.

How Is an ARM Different Than a Fixed-Rate Refinance?

An adjustable-rate mortgage (ARM) offers a lower initial interest rate that can adjust later based on the index and margin. A fixed-rate refinance loan keeps your rate steady for the entire loan term. Truss helps you compare both to decide which aligns with your timeline and risk tolerance.

How Do I Apply For a Conventional Refinance?

You can begin by requesting a rate quote or signing up for rate alerts on our site. A Truss loan officer will review your credit, income, and home equity, then guide you through the application, underwriting, and closing stages. We handle everything transparently, from loan approval to your final closing date.

Can Refinance be used to reimburse yourself for a home paid for in cash?

Yes, Truss can help you use a conventional refinance loan to reimburse yourself for a property purchased outright. This lets you unlock home equity without selling and use the funds for investments, renovations or other personal goals.

Quick process & great rates

Truss Financial Group did a great job handling our refi process. Gathering documents was easy and fast, which led to a quick decision. Marcus kept us updated and if challenged he found ways to manage things. We got a great rate and are using them again for our investment property.

Tyrone S.

Seamless refinancing process

Needed to refinance an inherited rental property out of state. We were concerned about proving income and revenue and Marshall was incredibly helpful through every stage. He made this a seamless process and we were funded in 30 days. They made this a very low stress process.

Ed B.

Reliable investment property lender

Great service! I have several loans with Truss for my investment properties. Trust me, they will take care of you!

Lisa R.

Excellent service for self-employed

Excellent financial services for self employed individuals. Abrahim was great to work with.

Rob G.

Bank statement refinance made easy

I did a refinance using bank statements. As a self employed individual, our W2 doesn't fully reflect our take in the business. The entire process was right around 30 days and was as painless as any large transaction can be.

Reggie O.

Fast no-doc loan for unique situation

Marshall was wonderful to work with and helped me immensely. I was able to get a no doc loan fast and easy. I had a unique situation and Marshall knew exactly how to handle my file.

Christopher W.

Perfect solution for retiree financing

I am retired and do not have regular monthly income so I no longer qualify for traditional loan products. I am also tech illiterate. Delania took time to help me navigate the process in a way that best fit my needs.

Sylvia L.

HELOC closed in under 15 days

Marshall was kind, patient, polite and professional with me. We got a HELOC loan and in less than 15 days they were able to do the closing! It was a great experience!

Marislea R.

Best loan officer in 37 years of real estate

Marshall was absolutely THE BEST mortgage loan officer I've ever dealt with and I have been a Real Estate Broker for 37 years! He is knowledgeable, professional, and prompt in communication.

Shelia S.

HELOC approved when others said no

All the other lenders turned me down but Caesar was able to get me the HELOC I needed and saved me. It was fast and is already finished.

Ronny T.

Informative HELOC process

I worked with Reza & Delania & they were very informative regarding my HELOC and the process was easy!

Daniel R.

Zero conditions on approval

Working with Marshall and Betty was incredibly easy. They prequalified my loan so well that I had zero conditions on my approval, just needed insurance.

Austin H.

Quick preapproval with best options

Very professional and easy to work with. Marshall got me preapproved quickly for my purchase and was helpful in finding the best options and rates.

C. C D.

Completely straightforward process

Marshall was amazing to work with - responsive, on top of all the details and super efficient. He made the whole process completely straightforward.

Nina D.

Easy first-time home purchase

Heather made my first time home purchase an exciting and easy process. I am looking forward to using her in the future and so should you!

Brianna R.

Refinance Your Conventional Mortgage with Better Rates and Flexible Options