If you are a homeowner looking to refinance your mortgage, you may be wondering what options you have. Refinancing can be an excellent tool for homeowners to save money. You just have to decide which type of refinance is best for you. Here are some of the most popular mortgage refinance options.
Benefits of refinancing
The bottom line for homeowners looking to refinance is to save money. The good news: there are several ways refinancing can save you money. Here are a few of them:
- Lower monthly mortgage payment
- Switch from variable-rate to fixed-rate loan to fixed rate
- Do a cash-out refinance and get funds to make repairs or renovations
- Remove private mortgage insurance (PMI)
- Adjust loan term and save on overall interest paid on the life of the loan
Mortgage Refinance options
So, what are the options? Each refinance comes with unique features and qualification requirements. Here are some of the most popular mortgage refinances:
A cash-out refinance is a type of refinance in which you replace your existing mortgage with a loan greater than what you owe on the property. The difference then goes to you in cash to use for anything you’d like. This could be a good way to get cash for much-needed repairs or to invest in a renovation project to increase your home’s value.
Rather than taking out a larger loan amount as you would with a cash-out refinance, a cash-in refinance means you are putting a sum of money towards the mortgage balance. By doing so, you decrease your loan-to-value (LCT) ratio. Owning more equity in your money could translate to better rate terms, a lower monthly payment, or a lower interest rate.
Rate and Term Refinance
If you took out the mortgage on your home when interest rates were higher or you were in a worse off financial situation, you could refinance to adjust the rate and term of your loan. This means you lock in a lower interest rate or take advantage of more favorable loan terms. This could lower your monthly payment.
FHA Streamline Refinance
If you already have an FHA loan, you could choose an FHA streamline to refinance to skip the appraisal and still get your lower monthly payment. Within the FHA streamline refinance process, you have two options:
- Credit-qualifying– Your lender runs a credit check and evaluates your debt-to-income ratio
VA Streamline Refinance
Also called a VA IRRRL, is a great option for borrowers who already have a VA mortgage loan. With this type of refinance, you can skip the appraisal, lower your interest rate or change your loan term. You can also refinance up to 120% of your loan value.
USDA Streamline Refinance
Another option for borrowers looking to skip the appraisal, USDA loan holders can take advantage of a USDA Streamline Refinance. Even if you own little equity in your home, you can refinance to lower your monthly payment through a lower interest rate or changing the loan terms.
Reverse Mortgage Refinance
For borrowers over the age of 62, a reverse mortgage can allow you to pause your mortgage payments while alive. You could even receive funds from the equity you already own in the property to put towards anything you’d like. The loan balance is paid to the lender upon the sale of the property or the borrower’s passing.
No Closing Cost Refinance
There will be closing costs with any closing, whether it be a purchase, sale, or refinance. A no closing cost refinance tacks those closing costs are accounted for with the loan through a higher interest rate or by tacking them onto the principal loan amount. This is a great option for borrowers who may have difficulty coming up with the upfront closing costs.
If you have defaulted on payments, a short refinance is a way to avoid foreclosure. You refinance for a loan lesser than you previously had so that your monthly payments are more affordable. This is a way for your lender to mitigate the risk of you foreclosing while you still keep your property.
The Bottom Line:
Homeowners can take advantage of refinancing to save money on their mortgage loan. There are several different types of refinances are suited for different borrowers in their unique circumstances.
To get started on your refinance, contact us today at (855) 848-2862 . We’d love to speak with you.