7 questions to ask when refinancing

2. What types of refinancing options do you offer?

If you have decided to refinance, it is essential to find the refinancing method that is right for you. Compare mortgage lenders and the types of refinance products they offer. Keep in mind that a refinance option may be better suited to certain situations — like accessing your home equity — than other options. That’s why it’s important to determine your goals before you go ahead with the refinancing process.

Below are some of the most common refinancing options.

Refinancing at rate and duration

A rate and term refinance, sometimes called “regular refinance” by lenders, is an option that allows you to replace the terms of your mortgage loan with terms that are more favorable to your financial situation. This type of refinancing can allow you to get a lower interest rate, change the term of your mortgage, and change your monthly payments. If you want to take advantage of low mortgage rates or pay off your mortgage sooner, a rate and term refinance may be a smart choice.

Refinancing by withdrawal

A cash refinance gives homeowners the ability to turn the equity in their home into cash. This process involves replacing your current mortgage with a new one with a higher principal balance. The new mortgage amount is the remaining balance of the mortgage plus what you’ve taken out of the equity in your home. After you complete a cash-out refinance, your lender will send you the amount of cash you want to use from the equity in your home.

A cash refinance can be a great option for homeowners who need a lump sum of cash, which can be used to pay off debt, support a savings account, fund a home improvement project and more.

Cash refinancing

Instead of taking money out of the equity in your home that you’ve built up over time, you can refinance to increase the equity in your home by applying more money to your mortgage principal. This refinance option is called a cash refinance and allows you to replace your mortgage with a smaller one after making a one-time lump sum payment.

A cash refinance can help you get better loan terms, like a lower interest rate and lower monthly payments. Plus, it helps reduce the debt you owe on your home.

You don’t always need to refinance. If rates are higher and you don’t want to touch your current mortgage terms, you may be able to perform a mortgage overhaul – a lump sum payment in which your mortgage is re-amortized over the remainder of the term so that your payment is lower – if your lender allows it.

There are also other types of mortgage refinancing, which may be more suitable for your situation. These include an FHA Streamline Refinance, a VA Streamline Refinance, a No Closing Cost Refinance, and a Reverse Mortgage. Be sure to compare refinance types and lenders before making a decision.

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