Cash-Out Refinance and
Rate-and-Term Refinance
Seems to be the new thing everyone is doing. What is it? Well, we all know its “hot” right now and everywhere you turn people are choosing to refinance their home. But why? What are the benefits? How do you know if its good for you? What is the difference between a cash-out refinance and rate-and-term refinance? How do you even know if you can qualify?
We at AWay Home Loans want to help answer some of those questions and share with you why so many people are coming to us right now to refinance. (Of course, we always recommend you call and speak to us directly to find out if it is a good fit, but hopefully, this will help point you in our direction!)
1
Know who you are working with.
Before you even get started it is SO important to do your research and remember not all mortgage lenders are created equally. When it comes to pricing, some may not always be honest, either. It is extremely important to know who you are working with. You want to know who you can trust and who may be able to save you money, plain and simple.
At AWay Home Loans, we pride ourselves on honesty and integrity. If we cannot help you save money, you have our word, we will tell you “it's just not a good fit.”
2
The Basics of Mortgage Refinancing
While saving money is the obvious reason for refinancing, there are plenty of reasons to consider it. In August 2008, interest rates for a 30-year fixed mortgage were 6.48%. OUCH. Right? When the financial crisis hit, rates steadily declined, and close to 4 years later, they were cut nearly in half to 3.35%.
The average rate for 2017 we were seeing up to 3.99% but peaked again in 2018 at 4.5% and slid to 3.94% in 2019, according to Freddie Mac. But even 2018’s HIGHEST rate could be lower than the one of an older mortgage you may have. In rolled 2020, and 30-year fixed mortgage rates dropped to 3.47%. THIS IS THE LOWEST POINT SINCE JULY 2016. By May 14th, 2020, they had dropped further to 3.28%. See today's rates.
3
Cash-Out-Refi - and what it means.
There is absolutely no secret that we are in hard times right now. Unfortunately, many people are struggling financially, and many have even lost their jobs.
However, when you own your own home you build equity, and often it is a cash cow without you even realizing.
Cash-out refinancing occurs when a loan is taken out on property already owned, and the loan amount is above and beyond the cost of transaction, payoff of existing liens, and related expenses. With new rate terms, you are advanced money effectively being able to take money out of your home in the form of cash.
This may answer your question as to why so many are choosing this option right now. It is allowing a security blanket for some in hard times, helping with college tuition or just allowing you to finally do those updates on your home as we all try to find ways to stay busy while stuck in our homes.
4
Rate-and-Term Refi and what it means.
A HUGE positive that has come out of the Covid-19 pandemic we are all in is that interest rates are REALLY LOW. We are seeing exceptionally low 3s and have even given some 2.99% rates. A rate-and-term refinance allows you to change your interest rate which in turn lowers your payments each month, saving YOU money. Keep in mind you also do NOT pay 2 months’ worth of mortgage! DO THE MATH FRIENDS!
So, ask yourself these questions!
- What is your rate currently? Could it be lowered?
According to Mike Fratantoni, MBA’s senior Vice President and chief economist, the 30% jump in refinances was due to “increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility… given the further drop in Treasury rates this week, we expect the refinance activity will increase even more.” - Are you a homeowner with an older, higher-interest mortgage?
- Do you have home equity that has risen?
- Is your credit rating higher than when you originally financed your home?
Refinancing can allow you to convert an adjustable-rate mortgage into a fixed-rate one, to lock in lower-interest payments in case they climb again or to just simply put cash in your pocket.
We at AWay Home Loans are here to help you with any questions you may have. Please reach out to us directly if you think refinancing your home could be something of benefit to you and your family. Check out what some of our clients had to say about a couple of refinances in the last several days.
