Have you owned your home for a while and heard about refinancing offers that you can take advantage of? If so, it will help to know what all of your options are for refinancing before you make a decision.
The most basic type of home refinancing is known as rate-and-term refinancing. This is when you essentially get a whole new loan with the purpose of changing the terms, rate, or both at the same time.
The reason that people will want to change their rate is that they want to lower their monthly payments. Rates may have gone down since they got their original mortgage, and they can take advantage of it. They may not save money over the length of the entire mortgage, but it will lower their monthly mortgage payment and offer them immediate relief.
A rate-and-term refinance can be helpful if someone wants to convert their 30-year loan into a 15-year loan to pay it off faster because they can now afford the higher monthly payments. This may be the only option if their lender does not allow the borrower to pay off the loan early, and refinancing is the only way to reduce the interest that they pay.
Cash-out refinancing is also known as a home equity loan. This is when you are allowed to mortgage your home and take out the equity as cash, which you can use however you want. This means that you can invest the money in something that will get a higher return than your low mortgage interest rate, or use it to make a big purchase.
The advantage of cash-out refinancing is that you can get the current equity of your home by having it appraised. If your home has significantly gone up in value, you can leverage that value with a new mortgage. Otherwise, you would not see this additional equity until you sold your home.
Home Improvement Refinancing
There is also the option to get home improvement financing. These often work as a line of credit, which allows you to borrow money against the equity of your home. Many people use home improvement refinancing as essentially a second mortgage, and you can only borrow what you need as you need it. It works great for homeowners that want to make home improvement to sell a home for a higher value, since they can pay off the home improvement loan with the money they make from the sale.
Contact a local bank to learn more about mortgage refinancing programs.Share