Homeowners refinance their homes for a variety of reasons. Refinancing a home can allow a homeowner to get a lower interest rate, switch from adjustable-rate mortgage to fixed-rate mortgage, shorten the term of their mortgage, finance a large project, or even use refinancing a mortgage to consolidate debt. There are as many ways to refinance a home as there are reasons to do it, and many homeowners are unsure of which method of refinancing a home is right for them. Here’s what you need to know about your options from the mortgage lenders at BrightPath.
Mortgage Lenders Refinancing Advice
From refinancing to consolidate debt to cash-out refinance and rate and term, there are many different refinancing options you want to consider:
A cash-out refinance allows you to use the equity currently in your property without incurring new debt. All refinancing options require you to pay off your current home loan and take out a new loan, but with a cash-out refinance, the amount you receive with your new loan is more than what you owe on your home. This extra cash can be used for a variety of purposes, such as renovations that increase the value of your home, paying off other debts to improve your debt-to-income ratio, to take a vacation, or even to pay tuition. When it comes to a cash-out refinance, mortgage lenders say there’s nothing that dictates what you must spend the extra money on — it’s yours to do with what you wish.
A fixed-rate refinance loan is exactly what it sounds like — a new home loan with a fixed interest rate, so the payment is the same every month. With an adjustable-rate mortgage, the amount you owe each month varies, making it challenging to budget and plan for your payments. When you refinance with a fixed-rate loan, you get the security of knowing what your payment will be each month and that even if interest rates go up significantly, you won’t be affected.
Rate and Term Refinance
A rate and term refinance is a popular refinance with mortgage lenders as it allows you to refinance your current mortgage when you want to change the interest or term of your home loan without advancing new money on the mortgage. Unlike a cash-out refinance, no new money is advanced on the mortgage. This is often the most popular type of refinancing because it carries lower interest rates. Typically, homeowners take out a rate and term refinance loan when they only want to reduce the payment on their current mortgage or get a shorter term and pay their home loan off faster.
In some cases, homeowners may choose an adjustable-rate refinance loan after talking with mortgage lenders. This affords the homeowner a fixed rate between five and seven years, and then adjusts to the conditions of the market. An adjustable-rate refinance loan may offer better interest than other types of loans and maybe a good option for homeowners who plan to refinance again in a few short years.
Contact BrightPath Today for More Information on Refinancing a Home
At BrightPath, our mortgage lenders work hard to make refinancing your home as easy as possible. When you need money for a home renovation project or college tuition through a cash-out refinance, or you want to reduce your interest rate or shorten your mortgage terms, we’re there for you. We’ll go over available options for you and help you choose the right loan to best meet your unique needs. Call us today at 888-222-6003.