Refinancing Services: Types, Uses, Benefits
If you’ve always wondered how to improve the terms of your home loan through refinancing services, you’re in the right place! With mortgages taking up a massive chunk of the average consumer’s debt obligations, astute borrowers are always looking for ways to minimize their premiums and pay off their home loans quickly. It’s no wonder the mortgage refinancing market is worth hundreds of billions of dollars and has trended upwards in the last decade.
But what are the various types of refinancing services used for and how can you benefit from them?
Here’s a detailed look at the three main types of refinancing services as well as their respective uses and benefits.
Cash-out Refinancing
How it Works
As the name suggests, cash-out refinancing allows borrowers to ‘cash out’ some of their home’s equity as part of a new loan. For instance, suppose you’ve got a mortgage on a house worth $250,000 and you’ve already paid back $100,000. If you opt for cash-out refinancing, you can take out a portion of the remaining $150,000 owed on the home in cash with the help of a mortgage refinance company. The remaining amount will be switched over to a new loan with a different interest rate and period.
Uses
Cash-out refinancing is an excellent debt consolidation tool. For example, if you’ve got outstanding dues on several credit facilities such as automotive loans and/or credit cards, cash-out refinancing allows you to pay them off in one go. In other words, you have the option of closing all other debt accounts except for your mortgage.
Benefits
Cash-out refinancing is tremendously beneficial for borrowers struggling to keep track of their debt repayments. If you’ve opened numerous lines of credit and want to avoid having to keep track of multiple dues, settling them all using a portion of your home’s equity will simplify the situation.
Another major benefit of cash-out refinancing pertains to emergencies. If you need to access funds quickly for things like sudden medical issues, cashing out some of your home’s equity is a great solution. We recommend discussing your circumstances with a trusted mortgage consultant (provided you’re comfortable with it) so they can guide you through the cash-out refinancing process. This will ensure you understand the terms of the new mortgage clearly and gain access to funds as quickly as possible.
Cash-in Refinancing
How it Works
Cash-in refinancing works in the opposite way to cash-out refinancing. It allows borrowers to pay off a portion of their mortgage and switch to a new mortgage on improved terms.
For instance, let’s say you owe another $80,000 on a mortgage and you receive an unexpected work bonus worth $20,000. If you engage in cash-in refinancing, you have the option of depositing your bonus into your home loan account. The mortgage lender you’re working with will proceed to offer you a new mortgage (in this case, for $60,000) at a lower interest rate and/or for a shorter period!
Uses
Cash-in refinancing is useful for borrowers that want to redirect windfalls toward clearing their mortgages quickly. It helps mortgage holders improve their long-term financial prospects by helping them to pay back their home loans sooner and with lower premiums than if they hadn’t engaged in cash-in refinancing.
Benefits
The two major benefits of cash-in refinancing are shorter mortgage terms and lower premiums. If you pay off a portion of your mortgage in advance through cash-in refinancing, the mortgage lender will issue you a smaller loan—and that means lower premiums.
Alternatively, you have the option of paying the same premiums as before—but since the total value of the mortgage will be lower, you’ll end up paying off your mortgage quicker than before you engaged in cash-in refinancing!
Rate and Term Refinancing
How it Works
Rate-and-term refinancing doesn’t involve taking from or adding to your home’s equity in the way cash-out and cash-in refinancing do. This form of refinancing is all about switching to a new mortgage at a better interest rate and/or shorter term with the help of a mortgage refinance company.
Uses
Rate-and-term refinancing is highly useful when the Federal Reserve drops the national interest rate. If the Fed’s new interest rate is below the rate on your mortgage, rate-and-term refinancing allows you to switch to a mortgage with an APR equivalent to the lower national rate.
Benefits
Rate-and-term refinancing is a great way to lower your monthly premiums assuming you do the math correctly. For example, suppose you switch from a home loan that has 20 years left with an APR of 5% to a new loan that has 30 years left with an APR of 4%. This might seem like a good deal, but crunch the numbers and you’ll realize you’ll end up paying additional interest by switching!
This is why it’s vital to discuss rate-and-term refinancing with an experienced mortgage lender. They’ll help you calculate optimal scenarios and help you use rate-and-term refinancing to switch to a mortgage that leaves you in a solid financial position in the future.
Atlantic Home Capital Offers Holistic Refinancing Services in Fort Lauderdale to Help Floridians Optimize their Mortgage Terms
Ready to speak to a mortgage consultant in Fort Lauderdale that specializes in all three types of refinancing services we’ve discussed today? If so, we look forward to welcoming you at Atlantic Home Capital.
Our comprehensive refinancing services have helped numerous homeowners improve their financial outlook in the sunshine state. We also offer an array of mortgage loans including VA loans for military personnel, no W2 loans for freelance workers without W2 forms, and FHA loans for homebuyers with low credit scores.
Consult a bilingual team of mortgage refinance experts on ways to improve your home loan terms by getting in touch with us today.
