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Refinancing refers to applying for a secured loan for the purpose of
replacing an existing loan secured by the same assets, or different assests. The
most common consumer refinancing is for a home mortgage. Commercial refinancing
also enables commercial property owners to restructure their debt as well.
Here are a few reasons to refinance:
- Reduced Interest Rate.
- Moving from an Adjustable Rate to Fixed Rate Mortgage or from Fixed Rate
to Adjustable.
- Extending the term of your loan. For example, going from a 15 year
payment plan to a 20 or 30 year payout. This would reduced your monthly
payment.
- Reduce the term of your loan. For example, going from a 30 year
payment plan to a 15 year payout. This would increase your monthly payment.
You may be able to accomplish the same by paying an extra principal each
month.
- There is a legal purpose - divorce, marriage or other purpose to change
ownership.
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6. Estate Planning/Taxes - There may be advantages to
refinancing your home and tax/estate planning. Check with your tax
advisor.
7. To take "cash-out". You may have put alot of money down
on your home or your home may have substantially increased in value.
This is called equity. You can either take a Home Equity Loan or Home
Equity Line of Credit (HELOC) - or by refinancing, perhaps a lower rate
and extra cash to reinvest. |
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No-Closing Cost refinances: This refinance option reduces greatly upfront
fees. You will pay few upfront fees to get your new mortgage loan. In fact as
long as the prevailing market rate is lower than your existing rate by 1.5
percentage point or more, it is financially beneficial to refinance because
there is little or no cost in doing so.
Cash-Out Refinance: This type refinance may not help you lower the
monthly payment or shorter your mortgage periods. It can be used for home
improvement, credit card and other debt consolidation if you qualify with your
current home equity; you can refinance with a loan amount larger than your
current mortgage and keep the cash difference.
Jumbo & Super Jumbo Refinance: For mortgages above $417,000 and
$650,000 or $1 Million respectively, a jumbo or super jumbo refinance will be
required, which may bear a slightly higher rate than a conventional mortgage
refinance.
WE STRONGLY RECOMMEND YOU SHOP FOR MORTGAGES and UNDERSTAND RATES, TERMS,
PRE-PAYMENT PENALTIES, BALLOON, CLOSING COSTS, FEES, APP FEES and MORE.
Do not close a refinance without consulting an independent attorney.
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