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Credit Quick Quip; The In’s and Out’s of Refinancing Part 2

Posted on by joep
25
Oct

Happy Tuesday everyone and welcome back to the In’s and Outs of Refinancing. In our last blog we went over what refinancing is, why you should consider refinancing and a few reasons that homeowners benefit from refinancing. If you need a refresher you can check out part 1 here. In todays blog, we will go over the different types of refinancing mortgage loans and how each one could benefit you as a homeowner. 

  

Types of Refinance Mortgage Loans 

When it comes down to refinancing, homeowners have a few different products to choose from depending on their goals! Below we will go over each option; rate-and-term refinance, cash-in refinance, cash-out refinance and streamline refinance.  

Rate-and-Term Refinance 

A Rate-and-Term refinance is one of the most common refinancing option and allows the consumer to take out a new loan for a different term and a different interest rate for the same loan amount. Some of the main reasons consumers choose a Rate-and-Term refinance are: 

  • Lower monthly payments 
  • Save on interest rates during the term of the loan. 
  • Allows you to pay off your loan faster. 
  • Can switch from an adjustable-rate to a fixed-rate program. 
  • Takes away PMI from your monthly payments! 

Cash-Out Refinance 

A cash-out refinance is not as popular as it normally increases the amount for your new loan and increases your monthly payment. The caveat is, a cash-out refinance allows you to withdraw cash from your home’s total equity. Most consumers choose a Cash-Out refinance to free up equity or pay off higher-interest debt. 

Cash-In Refinance 

If a Cash-Out refinance allows you to take from your home’s equity, then a Cash-In refinance allows you to put money toward your home equity. This allows you to reduce the remaining loan amount and lower your monthly payments. A Cash-In refinance can cancel your PMI and is normally a good idea when the mortgage is higher than your home’s market value. 

Streamline Refinance 

finally, there is the Streamline refinance. This option allows you to improve your mortgage rate with a new loan and is much easier to achieve than the standard qualification process. This option, however, is not available to everyone and the lenders will have their own preset qualifications. Many consumers look to this option to lower their interest rates and save money through the course of the loan. 

  

So there you have it! The 4 types of mortgage refinance loans available to most consumers. Before settling on one, be sure to research every option thoroughly and even think about speaking with a financial adviser to find out which would be better for you in the long run. Stay tuned for Thursday’s blog and the final part of the In’s and Outs of Refinancing! We will go over how much it costs to refinance and how you can prepare for refinancing your mortgage.