Six Mortgage Refinance Options: Which Is Right for You?
Refinancing your home in 2022 could be a great idea as home prices are rising and mortgage rates are at an all-time low. Discover your refinancing options and save money.
Six Refinancing Options You Should Know
If you notice that mortgage rates are lower than your current loan rate, you may want to consider refinancing. The right refinancing option may save you thousands of dollars.
Aside from low mortgage rates, you cay consider refinancing when:
- you want to pay off your loan in a shorter period;
- you earned enough equity to refinance even without mortgage insurance; and
- you want to tap out your property’s equity.
- More than checking which option has the lowest interest rate, your refinancing option should match with your financial situation. It’s essential to know your options to know which one fits your needs and goals.
Here’s a rundown of the most common refinance programs:
1. Reverse Mortgage
A reverse mortgage is ideal for borrowers age 62 who have enough equity on their property. If you currently have a refinancing program and want to change to a reverse mortgage, you don’t need to make loan payments while you’re alive.
You will also receive funds from your home equity which you can use in whatever way. However, you will still need to pay homeownership fees and mortgage over your loan term. If you pass away or choose to sell your property, the balance will be due to your lender through payments by your heirs or the home sale.
2. Cash-Out Refinance
In cash-out refinancing, you will take out a new mortgage loan on your property for a larger amount than your original loan. You will receive the difference on those loans in cash.
Also, taking a cash-out refinancing option will not add up your monthly payments as the larger loan will serve as a substitute for the current loan. However, you should know that there will be a new amount for your monthly payment under the new refinancing program.
It is best to read the fine print to learn how a cash-out refinancing program will affect you.
3. FHA Streamline Refinance
If you currently have a Federal Housing Association (FHA) loan, an FHA Streamline Refinance can help lower your monthly payments and avoid going through the FHA appraisal process again.
Depending on the condition of your refinancing, you can choose between a non-credit-qualifying or a credit-qualifying, where a lender checks your debt-to-income ratio and credit score for your FHA loan.
4. USDA Streamline Refinance
With the USDA Streamline Refinance, the United States Department of Agriculture allows borrowers to change their loan terms and lower their interest rates. This is ideal for people with low equity in their property.
Taking a USDA Streamline Refinance also avoids property inspections and appraisals. Here are some of the qualifications:
- Credit score
- Debt-to-income ratio
- Number of payments made on your prior loan
- Whether the mortgaged property is your primary residence
You can choose between USDA Streamline-Assist or USDA Streamline Refinance.
5. VA Streamline Refinance
Active service members and military veterans can qualify for a VA Streamline Refinance. This refinancing option offers loan borrowers the following:
- Lower interest rates
- Lower monthly payments
- Lower VA funding fee
- Lengthen or shorten their loan terms from adjustable-rate to fixed mortgage
You can get a VA Streamline Refinance, otherwise known as VA IRRRL if you are a service member, veteran, or surviving spouse. All you have to do is provide proof of residence to qualify.
6. Cash-In Refinance
Compared to a Cash-Out Refinance, a Cash-In Refinance requires borrowers to put a large amount of money into the refinancing program instead of withdrawing it. When you pay a chunk of your mortgage balance, you can increase the equity in your home and lower your loan-to-value ratio.
Doing so can lower your interest rates and monthly payments. A cash-in refinancing option is suitable for people with low home equity or underwater mortgages.
Compare Your Refinancing Options
If you need a financial lifeline, refinancing may be a good idea. With the many refinancing options available, you can find one that suits your budget, needs, and preferences.
As this is something that you shouldn’t do on a whim, you should do your research and talk to experts. The right one will help you save thousands, lower your monthly payments, and reduce interest rates.
Do this while mortgage rates are at historic lows. Get started today!