A mortgage is a serious commitment, but it is not something that you’re stuck with forever. Refinancing is an option to replace your existing mortgage with a new one that works better for your life. While refinancing has its benefits, you should think carefully about your current and future needs when determining if you need a new mortgage and what type of refinancing you may need. In today’s blog, we will introduce rate-and-term refinance, a common financing solution that could help you save substantially over time. If you’re interested in learning more about refinancing a home in Cumming, GA, call North Georgia Lending to schedule a free consultation.
Two Types of Refinance
In addition to rate-and-term refinance, there is another mortgage refinance option called cash-out refinance. With cash-out refinance, a borrower gets a new, higher-value mortgage to replace his or her old mortgage and, in exchange, receives a cash payout for the difference between the two. In many cases, cash-out refinancers can also get a better interest rate. Rate-and-term refinance, in contrast, replaces an old mortgage with a new one without a cash payout. As its name implies, this refinance option is designed to give a borrower a better rate, more preferred term, or both. It’s important to note that the principal balance remains the same with a rate-and-term refinance; homeowners will not receive a payout.
Why Choose Rate-and-Term Refinance
Homeowners consider rate-and-term refinance for all types of reasons. Sometimes, its simply because of great market conditions in which they want to take advantage of more competitive interest rates. Even a change of just a few percentage points on interest could save thousands a year in payments.
Other clients choose rate-and-term refinancing because of a change in their lives that would make a shorter or longer mortgage term preferable. A client who comes into an unexpected amount of money from a pay raise, for example, may want to pay off his or her mortgage faster with higher monthly payments. Someone who goes through a difficult time financially, such as a divorce or the death of a partner, may likewise want to extend the term of his or her mortgage for lower monthly payments.
The Benefits of Rate-and-Term Refinance
The benefits of rate-and-term refinancing are worth considering. You will need to weigh those benefits against some costs that come with refinancing. Just like when you secured your initial mortgage and paid closing costs, you’ll pay closing costs and loan originator fees when you refinance to a new mortgage. Depending on what type of refinance you choose, you may also be required to hire someone to perform an appraisal, which also has a fee associated with it.
Your Partner in Refinance
There’s a lot to consider with a mortgage origination or a refinance. If you still have questions about rate-and-term refinance, we would love to help you through the process. Contact North Georgia Lending to schedule a complimentary consultation or get a free quote for rate-and-term refinance.