Refinancing a mortgage is one of the most popular ways to lower your monthly payments. That’s because refinancing has the potential of lowering your interest rate and getting you better terms on your loan overall. This means not only that you can end up paying less per month, but you can also save money on the overall loan. But how exactly does refinancing work?
When you refinance your mortgage, you basically replace whatever you currently owe on your house with a completely new loan. If interest rates have dropped since you purchased your home, then you may be able to get a much lower interest rate on your refinanced mortgage.
This is a great way to save money because you may be able to:
- Pay less in the long run.
- Reduce your monthly payments (meaning less money to repay and more time to do it).
- Get some cash out of the refinance.
There are a few different types of refinance options, but one of the most popular is called a cash out refinance.
When you do a cash-out refinance, you replace your current loan with a new one. However, instead of using the new loan to pay off only what you owe, you choose to take out a bigger loan, depending on how much equity you have in your home. Then, you can receive the difference in cash.
You might be asking, “How can I refinance my mortgage loan?”
Basically, all you need to do is meet the requirements for the new loan and complete the application process. Depending on factors like your credit and national interest rates, you may be able to get great terms on a fixed-rate refinance.
But what if you have a special type of mortgage loan, like a VA home loan? Can you still refinance?
The VA has two different programs that service members, veterans and spouses can use to lower their rates:
- VA Streamline Refinance (or IRRRL) – Veterans and service members can do this to potentially lower their monthly payments and interest rates, change their loan term or switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
- VA Cash-Out Refinance – Veterans and service members with a VA loan can do this to refinance a home loan in order to get cash.
By Admin –