Rate and term refinancing lets homeowners obtain a lower mortgage rate and save on interest. It can also help in easing your payment burden by reducing the monthly mortgage payment. Also, it changes the mortgage term without adding new money to the loan. All these make rate and term refinancing an ideal loan choice for many people.
Since rate and term refinancing only changes the interest rate and/or the length of the loan, you can avail better rates when the time is right.
Maybe the interest significantly dropped since you originally availed your mortgage. So refinancing to get a better rate is ideal. You can save money on your monthly mortgage payment.
Say you have a 20-year fixed-rate mortgage with a lower monthly payment. You can avail rate and term refinancing loan to turn your loan into a 30-year fixed-rate mortgage. This situation can also work for the opposite purpose.
If you want to build your equity more quickly, then you can change your 30-year fixed rate to a 20-year fixed rate. But remember, having this option means paying a higher monthly payment. More of our monthly payment will go to your principal, so it can still be a win.
Rolling your closing cost can help you save money when availing of the rate and term refinancing. Note that you don’t get cash back with this loan product, but you can receive up to 1% of the loan amount in cash at closing.
Other advantages of having a rate and term refinance loan includes:
If you’re considering availing a rate and term refinance loan, make sure to talk to a professional first. While this loan product might seem the best for you at first glance, it’s better to have a fresh set of eyes to inspect your current and long-term financial situation to see if it fits with this type of loan.