Considering a Refinance?

There are several reasons to refinance especially considering today’s historically low interest rates. So let’s discuss what a “refinance” actually is,  and the two types of refinances available. When you refinance your home,  you take a new loan against your home and pay off the old loan, basically “re-doing” the financing.

The first type of refinance, is known as a Rate and Term refinance. The goal of this type of refinance is to either lower the payment or shorten or lengthen the term of the loan. Homeowners seek a Rate and Term refinance for one or more of the following reasons: 1.) Take advantage of lower interest rates in order to lower their monthly payment, 2.) Remove a mortgage insurance premium being paid, or 3.)Shorten or lengthen the number of years remaining on the loan. Qualifying is often simplified for Rate and Term refinances and interest rates are lower than that of the second type of refinance.

The second type of refinance, is known as a “Cash-Out” refinance. If you are seeking to take money out on the equity you have in your home, what you would be applying for would be referred to as a “Cash-Out” refinance. In this type of loan, you take out a loan for more than you currently owe, the old loan is paid off, closing costs are paid, and you pocket the difference. Such loans are helpful for consolidating debt, paying for college, making home improvements, etc. These types of loans typically carry a slightly higher interest rate than a standard rate and term loan, and the qualification requirements are a little more stringent, but no more difficult than your initial purchase.

SO HOW MUCH CAN YOU BORROW? The same numbers are considered for a refinance as they are for a purchase, 1.) FICO, 2.) Income, 3.) Debt, 4.) Assets, and 5.) Your loan amount as compared to the home’s value.

If you would like to know more about how a refinance could benefit you, please contact us.

Tezra Rogers is a Real Estate Broker/Loan Officer (CA DRE #01744515/NMLS #01466173) with 17 years experience and at last count, 816 transactions under her belt . Her clients become family, and in this house there is always room for more. You may contact her at trogers@pacificbayestates.com or at the corporate office in Suisun City, CA at 707.759.4251. Follow her on IG @pacbaybroker.

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