Refinancing Your Home Loan
Cash Out Refinance
Cash out refinance refers to a loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home. Cash out refinances are a common way for homeowners to access the equity in their property. Keep in mind, the lender may charge a higher interest rate with this type of transaction.
Refinancing a first mortgage and second mortgage into one first mortgage can be considered a cash out transaction.
No Cash Out Refinance
A no cash out, or rate and term, refinance is a loan that pays off the existing mortgage principal, interest due and usually the settlement costs associated with the transaction. It doesn’t provide the borrower with any cash at closing. This refinance is done primarily to lower the interest rate, convert a variable interest rate to a fixed interest rate or change the term.