What are the types of mortgage refinancing?

Types of Mortgage Refinance: Which is right for me?

Mortgage refinancing comes in two primary forms: rate-and-term and cash-out refinancing. Rate-and-term refinancing allows you to change your interest rate or term length, potentially saving you money over time.

On the other hand, cash-out refinancing lets you tap into your home’s equity. You take out a new loan for more than you owe, then pocket the difference. There’s also cash-in refinancing where you bring cash to the closing to lower your mortgage balance. 

Choosing the best type depends on your financial goals and circumstances. Always consider the long-term impact on your finances. 

Do you want to see how much you can save on a mortgage refinance? Check out our mortgage refinance calculator, and then apply for a mortgage refinance.

Mortgage Refinance Options

If you’re looking to refinance you’re mortgage, you have several options to consider. Not every option works for every situation, but it’s a good idea to know the basics about the different types. The available mortgage refinance options are as follows:

1. Cash-Out Refinance*

A cash-out refinance is when a homeowner gets a new mortgage that is bigger than their old one. This method provides homeowners with extra cash. Borrowers often use the extra cash for renovations, debt consolidation, or other significant expenses.

2. Rate And Term Refinance

A rate and term refinance is a type of mortgage refinance where borrowers adjust the interest rate and/or term of their existing loan. This move aims to make mortgage terms more favorable. Generally, it’s pursued to secure lower interest rates, ultimately leading to reduced monthly payments.

3. FHA Streamline Refinance

FHA Streamline Refinance is a quick way to refinance your current FHA mortgage. Lowering interest rates, it simplifies home refinancing by waiving off hefty documentation and credit checks. Ideal for homeowners with existing FHA loans, it offers lenient credit score requirements, promising economical refinancing even with a less-than-perfect credit.

4. VA Streamline Refinance

A VA streamline refinance, also known as an Interest Rate Reduction Refinance Loan (IRRRL), is an option for U.S. veterans to lower their existing VA loan rate. This refinancing option requires less paperwork and often comes with lower closing costs. It’s a valuable choice for veterans looking to reduce their mortgage payments.

5. No-Closing-Cost Refinance

A no-closing cost refinance involves refinancing your mortgage without incurring upfront fees. Borrowers often choose it to avoid hefty charges associated with closing a loan. However, lenders offset these costs by charging higher interest rates. It can be beneficial, but depends on individual financial situations.

Which type of mortgage refinance is right for me?

When considering mortgage refinancing, there are several options available to homeowners.

One of the most common types is cash-out refinance. This involves refinancing a mortgage for more than you owe and pocketing the difference in cash.

Rate and term refinance on the other hand allows homeowners to adjust their interest rate, loan term or both. This can decrease monthly payments and save on interest over the life of the loan.

A popular choice for those with FHA loans is the FHA streamline refinance. It minimizes paperwork and speeds up the process. Similarly, VA streamline refinance is available for those with VA loans.

If you’re concerned about upfront costs, no closing cost refinance might be the best fit. Although the rates might be slightly higher, it eliminates the need for out-of-pocket expenses at closing.

If you still have questions about the right type of mortgage refinance, speaking with a mortgage refi expert may help. 

What are some reasons to refinance a mortgage?

Mortgage refinancing is an option that many homeowners consider for a variety of reasons.

One of the main reasons to refinance a mortgage is to obtain a lower interest rate. This can result in significant savings over the life of the loan. Also, securing a lower monthly payment can aid in managing your daily finances and planning for the future.

Another reason people opt to refinance is to change the type of their mortgage. You may want to switch from an adjustable-rate mortgage to a fixed-rate mortgage to avoid the uncertainty of fluctuating interest rates.

Similarly, you might want to change the term of your mortgage. Refinancing from a 30-year to a 15-year loan can save you money on interest payments, even though your monthly payments might be higher.

Occasionally, homeowners decide to refinance to tap into their home’s equity. This is known as a cash-out refinance. This allows you to borrow more than what you owe on your mortgage and pocket the difference. This can be instrumental when you need to meet high-cost expenses like home renovations or education costs.

Each person’s financial situation is unique, and the decision to refinance a mortgage should be made after careful consideration and consultation with a financial advisor. It’s important to weigh the benefits against the potential risks and costs to ensure refinancing is the best move for you.

How can I apply for a mortgage refinance?

If you want a shorter mortgage term, lower monthly payment, or cash from your home equity, starting the process is simple. Simply fill out our mortgage refinance application and you’ll start down the path to achieving your financial goals. 

*Using funds from a Cash-out Refinance to consolidate debt may result in the debt taking longer to pay off as it will be combined with borrower’s mortgage principle amount and will be paid off over the full loan term. Contact Owning for more information.

Savings, if any, vary based on consumer’s credit profile, interest rate availability, and other factors. Contact Owning. for current rates. Restrictions apply.

Owning has no affiliation with the Federal Housing Administration or Veterans Affairs Department