Refinance Loans
Rate and Term
Refinance
The most common type of refinance is known as a “rate and term refinance” or a refinance to get a lower interest rate or change the terms of the original loan. Homeowners may also refinance into a different type of loan. For example, a first-time home buyer who used an FHA Loan might benefit from switching to a conventional mortgage loan after they have had several years to build their credit and improve their financial profile.
Cash Out
Refinance
Some homeowners may choose a cash out refinance to raise the balance of their mortgage loan to pay for other expenses. Not to be confused with a Home Equity Line of Credit (HELOC), a cash out refinance involves originating a new mortgage for a larger value than the original loan. In the case of a cash out refinance, the monthly mortgage payment will increase to cover the cost of the larger loan. For a HELOC, the lender issues an agreed amount of money using the borrower’s equity in the home as collateral.
5 Reasons to
Refinance Your Mortgage
Lower Your Interest Rate
Refinance when today’s mortgage rates are lower – drop your interest rate, reduce your monthly mortgage payment, and cut total interest over the loan’s life.
Example: Dropping from 7% to 6% on a $400K home loan saves about $250/month.
Reduce Your Monthly Mortgage Payment
Stretch your loan term (e.g., 20 to 30 years) or lock in a better rate to free up monthly cash flow – great for home improvements, paying off high-interest debt, or investing.
Access Cash with a Cash-Out Refinance
Use your home equity to fund renovations, consolidate debt, or seize investment opportunities – at rates much lower than credit cards or personal loans.
Switch to a Fixed-Rate Mortgage for Stability
If your current loan is an ARM and interest rates are rising, refinance to a fixed-rate mortgage for predictable, stable monthly payments.
Shorten Your Loan Term & Build Equity Faster
Refinance from a 30-year to a 15-year mortgage to save thousands in interest and pay off your home years earlier.