Rate and Term Refinance

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The most common type of refinance is known as a “rate and term refinance” or a refinance to get a lower interest rate or change the terms of the original loan. Homeowners may also refinance into a different type of loan. For example, a first-time home buyer who used an FHA Loan might benefit from switching to a conventional mortgage loan after they have had several years to build their credit and improve their financial profile.  This change to a conventional mortgage could remove the monthly mortgage insurance payment that is required with a FHA, or other loan program that began with mortgage insurance.

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Cash Out Refinance

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Some homeowners may choose a cash out refinance to raise the balance of their mortgage loan to pay for other expenses. Not to be confused with a Home Equity Line of Credit (HELOC), a cash out refinance involves originating a new mortgage for a larger value than the original loan. In the case of a cash out refinance, the monthly mortgage payment will increase to cover the cost of the larger loan. For a HELOC, the lender issues an agreed amount of money using the borrower’s equity in the home as collateral.

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Cash In Refinance

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A cash in refinance allows the borrower to lower their loan-to-value amount by making a payment toward the loan principal to potentially lower the monthly mortgage payment. A cash in refinance is a great option for a borrower who has the funds available through a bonus, inheritance, or other source.

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Renovation Refinance

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When a home is need of repair or remodel, renovation financing may be a better option than taking out a personal loan or using a credit card. With home prices on the rise, many homeowners are choosing to stay in their home longer and complete repairs or remodels through renovation financing, rather than shopping for a new, more expensive home that fits their needs. With a renovation refinance the cost of the renovation is financed into the cost of
the existing mortgage into one convenient monthly payment.