The various types of refinance mortgage loans
There has been a lot of interest in refinancing lately as mortgage rates are hovering at or near record lows. Even lowering your interest rate by 1% or more results in some serious savings for you every month. When shopping around for the best refinance home mortgage loan, you might wonder which one is the right one for you based upon your current situation. Scroll down to take a look at the different types of refinance mortgage loans available before you make your decision:
- Rate and Term Refinance: This is the most common refinance mortgage loan available wherein you repay your original loan and then replace it with a fresh loan with a new rate and set of terms. For people who are looking to simply lower their loan rate or to change their loan program, this is the best refinance home mortgage loan.
- Cash out refinance: If you are in dire need of cash, then the cash out program might just be your ticket out. This involves pulling out equity from your home thereby resulting in a higher loan balance. This will, of course, increase your monthly mortgage payment but then you will be able to balance it out with a lower interest rate on your new loan.
- Cash in refinance: There may be times when you want to keep your loan amount below a certain threshold by bringing in cash while refinancing. This type of refinance mortgage loan lets you do just that, thereby resulting in a smaller loan amount with a reduced monthly payment.
- Home Affordable Refinance (HARP): This allows home owners to borrow 125% of the value of their house, thus helping home owners who are underwater to take advantage of the low-interest rates on offer.
- Short refinance: To avoid foreclosure, your mortgage lender agrees to pay off your existing mortgage and replace it with a new loan which offers low-interest rates. These loans are not easy to come by, but some lenders do provide short refinance loans.