BANK STATEMENT
Refinance Options

A bank statement refinance is a type of mortgage refinancing option tailored to self-employed individuals or borrowers who may not have the traditional income documentation, like W-2s or pay stubs, required by conventional lenders. Instead of standard income proof, lenders base the borrower’s financial strength and repayment ability on bank statements, typically from the last 12 to 24 months. This provides flexibility for those who may have fluctuating monthly incomes but maintain consistent deposits, like business owners, freelancers, and independent contractors.

Rate-and-Term Refinance
Rate-and-Term Refinance involves adjusting either the interest rate, the loan term (length), or both on an existing mortgage. The goal is often to secure a lower interest rate, which can reduce monthly payments, or to change the term of the loan. For instance, moving from a 30-year to a 15-year term can result in paying off the loan faster, though it may raise monthly payments. In the case of a bank statement rate-and-term refinance, lenders analyze bank statements rather than standard income documentation to verify consistent cash flow and the borrower’s ability to repay.

Cash-Out Refinance
Cash-Out Refinance allows a homeowner to refinance their mortgage for a higher amount than they currently owe, receiving the difference in cash. This type of refinance can be useful for accessing funds for home improvements, debt consolidation, or other financial needs. In a bank statement cash-out refinance, lenders again rely on bank statements to assess financial health. The self-employed borrower’s cash flow is reviewed to determine the feasibility of granting a higher loan amount and their ability to handle increased payments if applicable.

Advantages of Bank Statement Refinance
Flexibility for borrowers with variable income streams. Allows access to equity through cash-out refinancing, even for borrowers without traditional income verification. Simplified income documentation process through bank statements rather than tax returns, especially beneficial for those with tax deductions that lower their taxable income.

Bank statement refinance options offer self-employed borrowers or those with non-traditional income sources a way to adjust their mortgage and access their equity, providing valuable flexibility where conventional refinancing may fall short. Interest rates on bank statement refinances are often slightly higher than those for standard refinances due to the perceived higher risk. Borrowers may need to demonstrate a higher level of financial stability and cash flow to qualify.