With today’s low interest rates, you could benefit financially by refinancing your home loan. Many people do not take advantage of the benefits of refinancing simply because they do not understand how the process works. When you refinance your home loan, you are completely replacing your existing loan with a new mortgage. As a result, you will have a new interest rate, loan term, payoff date and initial principal balance. There are two primary refinancing options available, and a closer look at these options will help you to decide if now is a good time for you to move forward.

Rate and Term Refinancing
Since you took out your current mortgage, you have reduced the principal amount. With a rate and a term refinance, your new home loan will have a lower starting balance that is aligned with the current amount owed. No cash equity is drawn out of the loan. Because your new home loan will have a lower initial balance, you can expect to have a smaller mortgage payment in many cases. You could also adjust the loan term. For example, you could opt for a 15-year term to pay off your loan sooner.

Cash-Out Refinancing
Cash-out refinancing means that you are taking equity out of the home in the form of cash. The new loan’s starting balance will be higher than what you currently owe. However, it could still be lower than your current home loan’s starting balance. You can also adjust the term length. Depending on your situation, it may be possible to get cash out of the home while also setting up a lower mortgage payment and a shorter term length.

Learn About Your Options
Are you eager to explore your refinancing options? Reach out to the MortgageDepot loan team today to learn more.

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