Refinance has been a big buzz word lately; chances are you’ve probably heard the term in advertisements and in the news lately. It’s a popular topic because mortgage interest rates are at an all-time low and people are struggling with debt in the United States.
A home refinance can be a good way to consolidate your debt and save you money month over month in mortgage interest rates. It can also be a good way to get a lump of cash to fund a big project or emergency bill. As good as it sounds, it’s not something to be taken lightly; understanding the concept and the different types of refinances will help you make the right decision for your family.
A refinance essentially means paying off your old loan with a new home loan with different terms. The two major types of refinances include:
- Rate and Term Refinancing – This one is rather self-explanatory in that you refinance the current rate and term, or length, of your current home loan. Ideally, you would then have a new loan with a lower interest rate and a shorter term that will help you pay off your home sooner and potentially reduce your debt in a shorter amount of time. This type of refinancing can save your family thousands of dollars in interest savings over the years that can be applied to other debts or help save for retirement.
- Cash Out Refinancing – A cash out refinance means you cash out the equity you’ve gained in your home over the life of your ownership to purchase something else. This could include things such as a remodel or unexpected bills. This type of refinance does not necessarily help you get out of debt, but it will give cash you may need.
Depending on your goals and needs, a home refinance may be a good option to reduce debt or get the cash you need. Contact the LaForest Team to learn more about the ins and outs of refinancing your home and what it could mean for your family.