Do you own your own home and are wondering how you can improve your financial situation? When you take out a mortgage to finance your property, it is a major financial commitment, but fortunately, your original loan terms do not have to remain permanent if you refinance your mortgage. Refinancing your mortgage with either a rate and term or cash-out refinance can help you reach your financial goals by allowing you to replace your current mortgage for a new one with more favorable conditions. If you own a home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and want to better understand mortgage refinancing, Foundation Mortgage can help. Read on to learn more about your mortgage refinancing options.
Rate and Term Refinance
In a rate and term refinance, your existing mortgage is replaced by a new one with updated terms and a lower interest rate. The purpose of a rate and term refinance is to help a borrower save more money over time. You can be eligible for a rate and term refinance as soon as six months after your initial mortgage started. Most borrowers choose a rate and term refinance in order to lower their monthly mortgage payments, to eliminate private mortgage insurance, (PMI), to change to shorter or longer terms, (depending on the situation), or to change their loan type. A rate and term mortgage differs from a cash-out refinance in that the principal balance of the loan remains the same and there is no cash payout involved.
With a cash-out refinance, a borrower’s existing home loan is replaced with a new loan for a loan amount that is larger than the amount that is currently owed. The borrower is then allowed to keep the difference as a cash payout. Many borrowers that opt for a cash-out refinance use the supplemental funds for home repairs and renovations, to help consolidate other debt, or for other personal financial purposes. A cash-out refinance can have many advantages for a borrower, including lower interest rates, the opportunity for tax deductions, and the chance to increase the value of the home through renovations and maintenance. It is important to note that with a cash-out refinance, closing costs and private mortgage insurance will still be required, although sometimes those costs can be combined into the refinancing of the loan.
Refinance Your Current Mortgage Today
It is definitely worth considering refinancing if you are looking to improve your current financial situation. Although there are associated costs with a refinance, it could ultimately end up saving you a great deal of money in the long run. If you are considering a mortgage refinance in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage today for a consultation.