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Types Of Mortgage Refinances
To refinance, or not to refinance – that is the question. There are a number of reasons why someone should consider refinancing and many of them serve a purpose beyond just lowering your interest rate.
Rate and Term Refinances
If you’re looking to refinance for the sole purpose of lowering your interest rate, changing your loan term, and/or reducing your monthly payment then your home loan will typically fall under the Rate and Term category. Check out our Refinance Mortgage Calculator.
Lower the interest rate
Lower the monthly payment
Change the term of the loan (ex: go from a 30 year to a 15 year)
Reasons For Refinancing Your Mortgage
Pay off interim from construction
Get rid of a second lien
Get rid of balloon payment
Finance home improvements and do some remodeling
Switch from an ARM to fixed rate, or vice versa
Get rid of MI
Remove someone from a loan / Owelty
Paid cash for a home and want your money back (i.e. delayed financing)
Types of Cash Out Home Loans
Agency Cash Outs – Agency Cash Outs are when you refinance an existing first and second lien BUT that second lien is a non-purchase second (i.e. that second lien was not originally used to buy the home). Example: Someone buys a home with a $300,000 loan, then a year later they decide to get a $30,000 home imprvoement second lien to put in a pool. Finally, let’s assume two years after the pool the rates drop and they want to refinance and combine both loans into a single mortgage. The new single mortgage is considered an “Agency Cash Out”. This is different than a Texas A6 cash out.
Pay off debts
Pay for school tuition
Build up asset reserves
Purchase another home
Myths: It’s not worth it if it’s not .5% or more?
No Costs vs. Nothing Due
There’s a difference between a no cost loan and a “nothing due” at closing. No costs means there aren’t any costs for this loan – i.e. no fees are paid at closing and no costs are rolled into the loan. <<< watch for stuff getting rolled into the loan. >>>>
When NOT to Refinance
In fact, there are cases where someone should NOT refinance even if they can lower their rate. The loan amount is so small that a big reduction in rate doesn’t equate to big enough savings. The reason is because of the fixed costs of a loan – a $40,000 loan has most of the same costs as a $400,000.
Texas Home Equity Loans
12-Day Letter for Texas Home Equity Loans – when taking cash out of your home in Texas, or when refinancing an existing A6 loan, there are certain rules to follow. Be sure you know these rules before starting the process.