The Different Types of Refinance Mortgages: Which One is Right for You?

Author: KP Mortgage | | Categories: Alternate Lending , Best Mortgage Rate , Commercial Mortgage , Investment Property Mortgage , Mortgage Broker , Mortgage Renewal , New Home Buyer Assistance , Private Lending , Refinance Mortgage , Rental Property Mortgage , Revenue Property Mortgage , Reverse Mortgage

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Refinancing your mortgage is a viable option to lower your monthly payments, decrease your interest rate, or shorten your loan term. And with the ongoing low mortgage rates, it may be the perfect time to consider refinancing. But with different types of refinance mortgages, choosing the right one can be overwhelming. In this blog, we will discuss the various types of refinance mortgages and help you decide which one is best for your financial goals. 

Rate-and-Term Refinance

A rate-and-term refinance is suitable when you want to change your loan's term or interest rate. It involves replacing your current mortgage with a new one with different loan terms, such as a lower interest rate, shorter loan term, or both. You don't get any cashback with this type of refinance, and the closing costs are rolled into the overall loan balance. If you're looking to reduce your monthly payment or pay off your loan faster, a rate-and-term refinance may be an excellent option for you.

Cash-out Refinance 

A cash-out refinance is a type of refinance that allows you to borrow against your home equity. It involves taking a new mortgage with a higher loan balance than your current one and pocketing the difference. You can use the funds for various purposes, such as home improvements, debt consolidation, or education. With this type of refinance, you could end up getting a higher interest rate and a more extended loan term than your previous loan. So, it's essential to weigh the benefits against the risks.

Cash-in Refinance

A cash-in refinance is the opposite of a cash-out refinance. It involves paying down your mortgage balance at closing. A cash-in refinance can help you lower your interest rate, reduce your monthly payment, and shorten your loan term. By doing this, you can also eliminate your mortgage insurance premiums or avoid paying for private mortgage insurance (PMI), especially if you owe less than 20% of your home value. However, this type of refinance may not suit everyone, especially those who don't have the financial resources to pay off a lump sum at closing.

Streamline Refinance

A streamline refinance is a fast and straightforward process that doesn't require a lot of paperwork, valuation, or credit checks. It's typically designed for homeowners who have an existing FHA, VA, or USDA loan and want to refinance into a lower interest rate without changing their loan term. With a streamline refinance, there is no cashback, and the closing costs are either rolled into the loan or refunded by the lender. This type of refinance is best suited for homeowners with a good payment history and a stable income.

Hybrid Refinance 

A hybrid refinance combines two types of refinancing, such as a rate-and-term refinance and a cash-out refinance. It allows you to refinance your mortgage, change your loan term, interest rate, and borrow against your home equity in one transaction. The terms and fees may vary depending on the lender and the loan type, so it's essential to do your research and compare offers before choosing a hybrid refinance.

Deciding which type of refinance mortgage to choose depends on your financial goals, the type of loan you have, your financial situation, and your eligibility. It's important to work with a mortgage professional who can guide you through the refinance process and help you find the best loan for your needs. With the right refinance mortgage, you can save money, shorten your loan term, or access cash to fund your goals. So, take the time to explore the options available to you and make an informed decision. If you are looking for refining mortgages, then contact KP Mortgage, We handle all the paperwork and walk you stress-free through the full mortgage application procedure. Our goal is to get the best mortgage product that is suited for your current and future needs, along with the best rate. 
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