Kingston Mortgage Explains Refinancing Services
After some time making monthly mortgage payments, some homeowners may start researching refinancing options. Their goals may include lowering interest rates and mortgage payments. Or they may be interested in receiving cash or consolidating their debts. If you wish to learn more about possible refinancing options, either contact Kingston Mortgage or continue reading this article.
What is Traditional Refinancing?
Traditional Refinancing, also known as no cash-out refinancing, is the process of replacing the original mortgage with a new one at a lower interest rate. A new mortgage at a lower interest rate should result in lowering your monthly mortgage payments. Traditional refinancing is also available with adjustable rates for lower payments during the initial rate period than comparable fixed-rate loans.
What are the Requirements for Traditional Refinancing?
In order to proceed with a refinance, you will need to meet certain requirements. First, you should have a good credit history. Since refinances are not backed by the government, refinances generally require a higher credit score. Secondly, your home’s current market value must be higher than your original home balance.
What is Cash-Out Refinancing?
A cash-out refinancing allows the homeowner to pay off their initial mortgage balance while also receiving a certain amount of cash. In a cash-out refinance, you can refinance up to 80% of the original loan. However, the amount of money still owed on the house will affect how much you will be able to receive in a cash-out refinancing. This initial balance must be paid off by the cash-out refinance. By the end of the cash-out refinancing process, you will receive cash, a new mortgage, and a new interest rate.
An Example of the Cash-Out Refinancing Process
Let us say that you initially borrowed $400,000 to purchase a home. And let us say that over time, you paid off $300,000 of that loan. That means you still owe $100,000 on your house. In a cash-out refinance, you can borrow up to 80% of the original $400,000 that you borrowed to purchase the home. 80% of $400,000 is $320,000 that is available to be borrowed. Now let us say that you borrowed the full $320,000 in a cash-out refinance. Remember you still owe $100,000. Therefore, a portion of the $320,000 that you took out will go to paying off the remaining balance ($100,000). That will leave you with $220,000 in cash to consolidate debt or put into the house for renovations.
What is HELOC?
HELOC stands for Home Equity Line of Credit and it is a line of credit for an approved amount that can be borrowed against as needed. The homeowner will be able to withdraw multiple times and make smaller payments towards it for several years before a payment schedule kicks in.
What is a Home Equity Loan?
A home equity loan is a lump sum of money given to the homeowner that will be repaid over time with fixed monthly payments. As with other types of loans, each payment will reduce the loan balance and cover the interest costs on a schedule.
If you wish to learn more about refinancing solutions for your specific needs, please contact Kingston Mortgage now.