Refinance Rates and How they Affect the Types of Mortgages
With mortgage refinancing, you can pay off one mortgage loan with another loan. Mortgage refinance transactions are of two types: cash out refinance (where you can take out around $2,000 of equity from your real estate property in the form of cash or in the form of paying debts) and mortgage refinance (where you need to pay off the first lien on a property).
Cash Out Refinance
The most important thing to note about cash out refinance is that you can get more than $2,000 of equity from your real estate property in the form of cash or paying off previous debts. From a lender’s point of view, when you opt for a second mortgage or home equity loan after availing the first mortgage, it is commonly known as cash out refinance.
Refinancing Your Mortgage
By refinancing your mortgage, you will get different terms and condition on the loan as compared to the current mortgage. This includes lower interest rates, low monthly installments and easy repayment schedule. Another significant thing about mortgage refinance is that you can leverage your home equity. Which means you can consolidate all your debts into single loan. Refinancing your mortgage is the way to go if your balloon payment date on a mortgage loan is coming.
Advantages of Mortgage Refinancing
- Lower monthly installment
- You can get loan amount against the home equity at a much lower cost as compared to credit cards
- Interest rates is going to be tax deductible
- You only need to deal with one lender
Terms and Conditions
Before availing mortgage refinance, it is of paramount importance that you read the terms and conditions of the loan carefully. Divide the mortgage refinance cost by the money you are going to save monthly with new mortgage refinance rate. This is commonly known as payback period. To get a clear picture of the housing industry, visit the website of the US Federal Reserve and Mortgage Bankers Association of America. If you are not happy with the terms and conditions of the loan, it is better to look for another loan package instead of accepting the loan offer.