So, you're thinking about a refinance? Be sure to read up on the four most common mortgage refinancing loans to compare so you can make the best decision for you and your family!
1. Rate-and-Term Refinance Loans
Rate-and-term refinancing pays off an existing loan with a new loan, continuing to use the current home as collateral. This refinancing method may save you money with lower interest rates and an affordable payment term.
Type of Rate: Fixed vs. Adjustable
When to Choose a Fixed-Rate Mortgage:
- You want to lock in low-interest rates
- You prefer consistent monthly payments
- You have an existing adjustable-rate mortgage with interest rates that are predicted to adjust upward
When to Choose an Adjustable-Rate Mortgage:
- Your fixed-rate mortgage has a high-interest rate
- You plan to sell your home and move before the initial rate period ends
- You’re comfortable with interest rates being unpredictable
Term Length: 15 vs. 30 years
When to Choose a 15-Year Refinance:
- You prefer shorter payoff time and a typically lower interest rate with higher monthly payments.
When to Choose a 30-Year Refinance:
- You want to lock in a fixed interest rate, without a higher payment.
2. Cash-Out Refinance
Cash-out refinancing means taking out a new loan that is larger than the existing one. This refinancing method will pay off your current loan and provide you with extra cash to use for other purposes. When to Consider Cash-Out Refinancing:
- Your home is worth more than you owe on the existing mortgage.
- You want to consolidate or pay off debt.
- You want to finance home improvements or education.
3. Cash-In Refinance
A cash-in financing requires cash at closing for the new loan and is for homeowners that owe more on their current loan than the home is worth. Consider cash-in refinancing if you are trying to avoid high costs on mortgage insurance and jumbo loans.
4. Government Refinance
The Home Affordable Refinance Program (HARP) supports refinancing up to 125 percent of the value of a home. If you have FHA mortgage homeowners, government refinance could be for you. As a homeowner, consider your existing loan and the factors that are important to you as you move forward on determining a refinancing option for your home.
Speak to a professional today!
By Kaylee Fantis Sources: http://www.bankrate.com (1) http://www.bankrate.com (2) https://www.erate.com