Minnesota is known for its friendly communities, high quality of life, and beautiful natural landscapes.
From its thousands of lakes to the lively arts and food scene in Minneapolis–St. Paul, homeowners can enjoy outdoor recreation in every season along with strong schools and stable neighborhoods.
If you already have a home loan in Minnesota and are looking to lower your rate, tap into home equity, or fund a renovation, refinancing your mortgage could be a smart option.
Be sure to review the specific rules and requirements that apply to refinancing your mortgage in Minnesota, which include the following:
- Minnesota homeowners have a right to cancel a refinance transaction within three business days of closing.​
- Lenders are required to clearly disclose all terms, and Minnesota law strictly prohibits predatory lending tactics, such as excessive fees or equity stripping, during refinancing.​
- Special counseling is required before refinancing certain subsidized or “special” mortgages, and some state-backed loans have income, property, or loan amount limits.
What is refinancing?
Mortgage refinancing is the process of replacing your current mortgage with a new one. This is typically to secure a better mortgage interest rate, change the length of the loan, or tap into the home’s equity. This can help homeowners lower their monthly payments, reduce how much they’re paying in interest, or access cash for other financial needs.
For homeowners in Minnesota, refinancing may offer the resources to consolidate debt or the extra funds to take on that new home project.
Some types of refinancing, like Cash-Out Refinancing, allow homeowners to access the equity they’ve built up in their home and convert that equity into cash for other things. Refinancing can also let homeowners change their mortgage terms or the type of home loan they have. This could be refinancing from a Federal Housing Administration (FHA) loan to a Conventional loan to get rid of the mortgage insurance that is required with FHA loans. You may also be able to shorten the length of your loan.
Some benefits of refinancing your mortgage may include:
- Turning your home equity into funds to use for whatever you want
- Getting better terms and conditions on your loan
- Accessing a lower mortgage rate
- Lowering your monthly mortgage payments
- Shortening the duration of the loan
When is it worth it to refinance your mortgage?
When it is worth it to refinance your mortgage will depend on your unique financial situation and goals. However, even a small drop in interest rates can lead to lower monthly payments. This may save you tens of thousands of dollars, depending on the length of your loan term.
Home loans for refinancing in Minnesota
There are different home loan options for refinancing your mortgage, depending on your needs and your financial profile. The most popular include rate-and-term refinancing, Cash-Out refinancing, and government-backed refinancing options, like FHA and U.S. Department of Veterans Affairs (VA) loans.
Rate-and-term refinance
Rate-and-term refinancing replaces your current mortgage with a new home loan that has a different loan term or interest rate. Common examples include refinancing from a 30-Year Fixed-Rate mortgage to a 15-Year Fixed-Rate mortgage. You would do this to shorten your loan term or take advantage of a drop in interest rates.
The benefits of rate-and-term refinancing include:
- Lower interest rates
- Shorter loan terms
- Less interest paid over time
- Lower monthly payments
- More favorable loan conditions
Rate-and-term refinancing is generally used by homeowners to lower their interest rate if rates have dropped since they took out their mortgage. This can often lower your monthly payments, potentially saving you thousands of dollars over the life of your loan. If you want to pay off your mortgage faster and lower the amount of interest you’ll pay over the duration of the loan, you could use a rate-and-term to refinance to a shorter term.
Conventional loan refinance
A Conventional loan refinance is the process of replacing your current mortgage with a new Conventional loan. This type of refinancing is often done to lower your interest rate, to change to a fixed-rate mortgage, or to get rid of certain aspects of government loans like mortgage insurance.
The benefits of a Conventional loan refinance include:
- Lower monthly payments: Refinancing to a lower interest rate or a longer loan term may reduce monthly mortgage payments.
- Eliminate mortgage insurance: If you have 20% equity in your home, you can eliminate private mortgage insurance (PMI) or mortgage insurance premiums associated with FHA or USDA loans.
- Flexibility: Conventional refinancing can replace various types of existing mortgages, including FHA, VA, USDA, and Adjustable-Rate mortgages.
To qualify for a Conventional refinance loan, you’ll typically need a credit score of 620 or higher*, a debt-to-income ratio of 45% or less, and at least 5% equity in your home. However, having 20% equity is recommended to avoid PMI.
Cash-out refinance
A Cash-Out Refinance is a type of home loan refinancing that lets homeowners tap into their home’s equity by replacing their current mortgage with a new, larger loan. The homeowner then receives the difference between the old and new loans in a cash lump sum. The money can be used for debt consolidation, home improvements, investing, or other expenses and projects.
These loans are often popular with homeowners because the interest rates are generally much lower than for most credit cards. This can make it easier to consolidate debt and pay it off.
Generally, you can take out up to 80% of the value of your home. However, you will still need to pay closing costs.
The most common benefits of Cash-Out Refinancing include:
- Improved cash flow
- Debt consolidation
- Simplified finances
- May raise your credit score
- Eliminate other high-interest debts
- Improved loan terms
Using a Cash-Out Refinance requires you to qualify for a new loan with new terms. Make sure to consider your financial situation and goals to see how refinancing might be right for you.
FHA Streamline Refinance
An FHA Streamline Refinance is a refinancing option designed for homeowners who already have an FHA loan. FHA Streamline Refinances don’t typically require an appraisal or income or credit verification. It allows borrowers to refinance their mortgage with minimal documentation and potentially lower closing costs.
To qualify for an FHA Streamline Refinance, borrowers must meet specific requirements. This includes being current on their mortgage payments and demonstrating a “net tangible benefit” from the refinance, according to the FHA. A net tangible benefit includes things like being able to get a lower interest rate or lower monthly payments.
The benefits of an FHA Streamline Refinance include:
- Lower monthly payments: By refinancing to a lower mortgage interest rate, borrowers may reduce their monthly mortgage payments.
- Faster processing: The streamlined process typically results in faster processing times compared to traditional mortgage refinancing.
- No appraisal: Part of the streamlined process includes not requiring an appraisal on the property.
- No credit check: While the FHA does not require a credit check to qualify, your lender may still have a credit requirement. However, FHA credit score requirements often go as low as 500.
- Lower closing costs: Lower fees help you save money.
VA Streamline Refinance (VA IRRRL)
A VA Streamline Refinance, also known as a VA Interest Rate Reduction Refinance Loan (IRRRL), is a mortgage refinance for veterans and active-duty military personnel who have VA loans. There is no appraisal required, no credit check, and the process is generally simpler than for Rate-and-Term refinances.
To qualify for a VA Streamline Refinance, you must already have a VA-backed home loan. You need to use the IRRRL to refinance that current loan. And you must prove that the home is or was your primary residence.
The benefits of a VA Streamline Refinance include:
- Lower monthly payments: By refinancing to a lower interest rate, borrowers can potentially reduce their monthly mortgage payments.
- Faster processing: The streamlined process typically results in faster processing times compared to other refinancing loans.
- Payment stability: Borrowers can switch from an adjustable-rate to a fixed-rate mortgage. This may help stabilize their monthly payments.
- No credit check: The VA does not require a credit check for an IRRRL. However, individual lenders may choose to perform one as part of their internal policies.
- Lower interest rate: This option is designed to help borrowers lower their interest rate and potentially reduce their monthly mortgage payments.
- No appraisal required: In many cases, an appraisal is not necessary. This can save both time and money.
USDA Streamline Refinance
A USDA Streamline Refinance is a refinancing option that is available for homeowners who currently already have a U.S. Department of Agriculture (USDA) home loan. There is no appraisal or inspection required. These loans also generally have a simpler process than other loans used for refinancing.
To qualify, homeowners must have an existing USDA loan, earn within the USDA housing income limits (typically no more than 115% of the median income of the area), and the property must be your primary residence.
The benefits of a USDA Streamline Refinance include:
- Lower interest rates: Securing a lower interest rate may reduce both monthly payments and long-term interest costs. This may save you thousands of dollars over the life of your loan.
- Streamlined approval process: The simplified application process requires less paperwork and often leads to faster approval times.
- Affordable for lower-income households: The USDA Streamline Refinance program supports low-to-moderate income homeowners. This keeps more rural housing affordable and accessible for those who qualify.
- Flexible credit requirements: The USDA does not require a minimum credit score. In some cases, no credit check may be needed. However, if your lender does require a minimum credit score, homeowners typically need at least 580.
- No appraisal required: In many cases, an appraisal is not necessary. This may save time and money.
How does refinancing a mortgage work in Minnesota?
Refinancing a home loan in Minnesota works by replacing your current mortgage with a new one. Your new mortgage has new terms and conditions. This may include a new interest rate, a different duration (a shorter or a longer term of repayment), or a new principal balance.
When you refinance, you go through a similar process as when you first applied for a home loan. However, there are differences in the process depending on the loan type.
How the process works:
- Define your refinancing goals: Determine why you want to refinance. Is it to lower your monthly payments, shorten the duration of your loan, or access cash?
- Check your credit and financial situation: Review your credit report and score, income, and debt-to-income ratio (how much debt you have compared to your income) to understand your refinancing options.
- Apply for refinancing: Submit your application and provide the required documentation. This may include income verification and property appraisal (if required).
- Underwriting: Your lender will review your application and assess your current financial profile.
- Pay closing costs: Refinancing has its own closing costs. These are generally between 2% and 6% of the loan amount.
- Close the new loan: Sign the final paperwork, pay any closing costs, and complete the refinancing process.
Refinancing mortgage rates in Minnesota
Refinancing mortgage rates in Minnesota currently reflect the national averages. Mortgage rates change daily and are affected by a wide variety of factors, including changes in the economy, government policies, as well as your own financial profile.
Refinancing and home equity loans
Refinancing and home equity loans are two different financial tools that homeowners can use to tap into the value of their homes.
Refinancing replaces an existing mortgage with a new loan, often to secure a lower interest rate or change the loan terms, such as the length.
A home equity loan, on the other hand, is a separate loan that allows homeowners to borrow against the value of their homes without affecting their primary mortgage.
While refinancing can be used to access cash through a Cash-Out Refinance, homeowners can also use a home equity loan or a Home Equity Line of Credit (HELOC) to achieve similar goals without changing their current mortgage.
Refinancing calculator
You can use our mortgage refinance calculator to help you decide if refinancing your mortgage makes sense for your current financial situation. Use it to compare loan term lengths, mortgage interest rates, or loan amounts. This can help you calculate potential savings and figure out new monthly payments and the break-even point for your refinance. The break-even point is when you will save more money than you paid for the refinance.
How to calculate your refinance break-even point
To calculate your refinance break-even point, first add up your total loan costs. This includes your closing costs, which are between 2% and 6% of your total loan amount. Next, you will figure out your monthly savings from your new refinance by subtracting your new monthly payment from your old monthly payment.
Then, you divide your total costs by one month’s savings. This will give you the number of months it will take to recoup the costs of refinancing.
For example, say you pay $4,000 to refinance your loan. Your old monthly payment is $2,200 and your new monthly payment will be $2,000. Your calculation would look like: $4,000/$200 = 20. Your break-even point would be 20 months.
One of the main things to consider here is time. How long do you play on staying in your home? If you plan on moving before you recoup the costs of the refinance, it may not make sense to refinance. But if you plan to remain in your home, you may be able to save quite a bit of money.
Refinancing closing costs
Typically, refinancing closing costs will be between 2% and 6% of your loan amount and include the following:
- Loan origination fee: This fee is charged by your lender to review and prepare your loan. It includes underwriting and loan processing.
- Appraisal fee: This covers the appraisal of your home. It is often required by your lender to determine the value of the home. However, not all refinances require an appraisal.
- Inspection fee: A home inspection is also not always required. However, it may be required in some cases to confirm the structural condition of the property.
- Homeowner’s insurance: This is usually required by lenders before you close on a home. Typically, when you are refinancing the lender will just need proof of the existing policy.
- Title search and title insurance: A title search confirms that you are the lawful owner of the property you are trying to refinance. The title insurance ensures that you have a clean title without potential issues.
- Prepayment penalty: Your current mortgage may have a prepayment penalty. This is what you will have to pay if you pay off your existing mortgage early. Some lenders require the fees, while others do not.
Mortgage Refinancing FAQs
How to get equity out of your home without refinancing
There are several loans that you can use to get equity out of your home without refinancing your existing mortgage. They include a home equity loan, a Home Equity Line of Credit (HELOC), and a reverse mortgage.
A home equity loan allows you to borrow a lump sum against your home’s equity. This can be ideal for large, one-time expenses like home renovations. Meanwhile, a HELOC provides a revolving line of credit that you can draw upon as needed. Interest is only paid on the amount borrowed. Interest rates are usually variable, which means they change over time.
For homeowners aged 62 or older, a reverse mortgage can provide access to home equity without requiring monthly payments. The loan is repaid when the homeowner sells the property, passes away, or moves out.
How much does refinancing a mortgage cost in Minnesota?
Refinancing a mortgage in Minnesota typically costs between 2% and 6% of the loan amount. These costs cover various fees, including lender fees, third-party charges, and prepaid items like taxes and interest.
Does refinancing hurt your credit?
Refinancing may temporarily affect your credit score due to the hard inquiry from the lender and changes in your credit history. When you refinance, you are paying off your old loan and starting a new one. This means that the new mortgage is a newer line of debt, which is often considered riskier and will cause your credit score to decrease. However, this impact may be short-lived and can be minimized by maintaining good credit habits. As you pay off the new loan, your credit will balance back out.
What credit score is needed for refinancing in Minnesota?
The credit score you need to refinance depends on the loan type you are using. For instance, if you are refinancing an FHA loan to an FHA Streamline Refinance, you may need a minimum credit score of 500. However, if you are refinancing a Conventional loan, you may need a minimum credit score of at least 620*.
How long does it take to refinance a mortgage in Minnesota?
Refinancing a mortgage in Minnesota usually takes around 30 to 45 days, depending on the lender and other factors. Some things that can make refinancing take longer are errors or inconsistencies in documentation or issues with the borrower’s finances.
How much equity do I need to refinance my home in Minnesota?
Generally, you will need at least 20% equity in your home to refinance your mortgage in Minnesota. However, you should always check with your lender to see their requirements.
Can I refinance my mortgage to a shorter loan term?
Yes, refinancing to a shorter loan term, such as a 15-year mortgage, can help you pay off your loan faster. This can also reduce total interest paid.
How do I qualify for a good interest rate when refinancing?
To qualify for a good interest rate, you’ll need a solid credit history, a low debt-to-income ratio, and sufficient equity in your home. This means that those with higher credit scores, less debt compared to how much they earn, and those with larger amounts of equity (gained by paying down their mortgage and their home value appreciating) may qualify for lower interest rates.
*As of November 2025, Fannie Mae has changed their automated system to accept credit scores under 620, which will be considered in the context of the rest of the borrower's financial profile.
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