Mortgage Refinancing: The Basics
A mortgage is a big commitment that should be considered part of a long-term financial plan. That doesn’t mean, however, that you’re stuck with your home loan forever if it no longer best suits your life and finances. Mortgage refinancing is an increasingly popular option among homeowners who want better rates, different terms, or who would like to borrow against the equity they’ve built in their homes. David Sefton at Riverside Mortgage Group is a skilled home financing professional who will walk you through the benefits and specifics of different refinancing options. Clients in Beaverton, Portland, Gresham, and Oregon City have trusted Riverside Mortgage Group for years because they offer local experience backed by the lending power of national lenders.
There are two main divisions of mortgage refinancing: rate-and-term refinancing and cash-out refinancing. Rate-and-term refinancing is what many people think of with a mortgage refinance. In essence, you take on a completely new mortgage that replaces your old mortgage. Rate-and-term refinance does not, however, increase your loan value. Your mortgage stays the same size, and you trade out your old and new mortgages for better interest rates or a different term length.
Rate-and-term refinancing is a popular financing choice for clients who have existing “old” mortgages with adjustable rates (ARMs). If you have one, you know that ARMs have a stable interest rate for a period – typically from 1-7 years – then an adjustable rate that goes up on a regular basis thereafter. While the initial interest rate may have been a benefit up front, some find it beneficial from a budget perspective to switch to a fixed-rate mortgage.
Another common type of rate-and-term refinancing client we see are clients with nonconventional loans like FHA and USDA loans. These loans have great benefits initially, like minimal approval requirements and low down payment. After time, however, many of these homeowners find they can secure a better interest rate by refinancing after their credit scores or financial status improves. Some refinance to a conventional loan, while others choose another nonconventional loan, like FHA Streamline refinance. FHA Streamline requires limited credit documentation and underwriting and helps lenders secure a better interest rate or preferable terms.
The second type of refinancing is known as cash-out refinancing. Cash-out refinancing occurs when a borrower takes out a new mortgage valued higher than his or her existing mortgage and receives a cash payout. Homeowners who choose cash-out refinance want to access part of their home equity, and they do so by taking out a larger mortgage than before.
Homeowners who choose cash-out refinancing do so for all types of reasons. Some pay off a high-interest debt like a credit card. Others use the cash they receive to make home repairs. Some pay for college tuition or a dream vacation. Whatever the reason is you might consider cash-out refinance, it’s important to consider the long-term financial implications of taking out a higher-value mortgage. Our team can help you look at the real cost of cash-out refinancing to determine if it makes sense to access your home equity now.
See if Refinancing is Right for You
Whether you’re considering rate-and-term refinancing or cash-out refinancing, our skilled home financing team is here to help. David Sefton has helped hundreds of clients in Beaverton, Portland, Gresham, and Oregon City explore their mortgage refinancing options to make the best-informed decision for themselves. If you’re interested in learning more or would like a free refinancing quote, contact Riverside Mortgage Group today.