Greetings from all of us here at your local loan office! With the transition of the seasons finally upon us, it seems like an appropriate time to talk about something else that would be good transition for finances before the holiday season reaches near. Let’s dive into a brief explanation of a rather tricky topic: Mortgage Refinance.

Most who have gotten a mortgage will be aware of this, but may not fully understand what a mortgage refinance is. Think of it as a sort of ‘Refresh Button’ for your current mortgage.  This is done in almost the same manner as the original mortgage was obtained. Life changes and there is nothing wrong with wanting your mortgage to do the same.  Your needs today may not be your needs 10 years down the road. The new mortgage can then take the form of whatever the buyer needs, be it a lower rate or monthly payments, cash from a home equity line, or to shorten the life of the mortgage to pay it off sooner. Lots to choose from! Typically, there are three kinds of refinance options available.

Rate and Term Refinance – A mortgage where the refinance only changes the interest rate or term of the original. This is the most common form of refinance, where little is changed, but can have a dramatic effect on the length of time. The owner may even be able to acquire some cash after closing, but not over a couple thousand.

Cash Out Refinance – Like the rate and term option, aspects of the mortgage are changed. However, the biggest difference is the amount of money borrowed. The money borrowed with the loan increases with this option by more than 5% than the original. This extra money is given to the borrower, but since they only owe the value of the original loan, this extra is paid at the closing.

Cash in Refinance – As one can imagine, this is the opposite of the former option. The borrower brings money to the closing to pay off the amount to the banks. This can result in a lower length of time for the mortgage, or a much lower rate. Maybe both! This is a great way to get lower rates for your mortgage, or to even cut out your PMI payments entirely.

This is only a very brief overview of the refinance options for loans. Naturally, this is just the beginning. We encourage anyone thinking of considering a refinance or the mortgage to contact us at 802-863-2020, to speak to one of our talented loan officers. We will be able to answer all questions, and even begin the process. We look forward to hearing from you!