4 types of refinance loans
Life can be hard to predict. As you settle into your home and pay off the first few years of your mortgage, the needs and wants of your family are subject to change. In many cases, refinancing can get you a lower interest rate or let you adjust the length of your loan to better fit your current situation. Take a look at these four common types of refinance loans.
Rate and term refinance
Looking to trade your 7-year adjustable rate mortgage for long-term stability? A fresh 30-year fixed rate loan could be your best bet. Not ready to restart the clock on a new 30-year refinance? Enjoy a lower rate and pay off your mortgage faster with a 15-year loan. Refinancing your rate and term could lower your monthly mortgage payments.
Government loan refinance
Are you financing your home with an FHA loan? The Home Affordable Refinance Program (HARP) lets borrowers refinance up to 125% of their home value. Another option is the FHA streamline program, which lets you refinance without having to verify income or assets. Depending on how much you’ve already paid on your original loan balance, an appraisal might not be required either.
Need extra cashflow? If your home is worth more than you owe on your existing mortgage, you may be able to pull out equity and secure a lower interest rate. The tradeoff? A larger loan amount and a prolonged loan amortization. As a general rule of thumb, you may want to consider a cash-out refinance if you need more than $50,000.
Financing your home with a Home Equity Line of Credit? Doing so allows you to refinance by paying it off with a traditional first mortgage. If you have a first and second mortgage, you can combine them into one loan once their balances are low enough to allow the refinance.