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A mortgage refinance is simply the
re-writing of the first mortgage on your
home. It can be structured many different
ways. Some examples are:
1. No cash
out. This is the refinancing of an existing
mortgage balance only. The fees associated
with refinancing a home are often included
are not considered cash out, because they
are not proceeds given to the
borrower.
2. Cash Out. There are several types of cash
out refinancing, whereby the borrower is
given proceeds for items other than
re-writing a first mortgage balance or the
fees associated with it.
a. Debt consolidation - Credit
card debts and other bills are included in
the new mortgage balance.
b. Second mortgage or home
equity loan refinancing - A payoff for a
secondary lien is included in the new
mortgage loan with the existing first
mortgage balance.
c. Home improvement - Proceeds
are provided directly to the borrower or the
funds can be directed to the home
improvement companies out of escrow.
d. Educational expenses,
vacation plans, etc. etc.
-----NOTE: Most conventional mortgage
programs have limits on cash out amounts.
Loans that do not fit the normal guidelines
may be financed at a higher rate. Please ask
the mortgage professional that you choose to
discuss all available options.
3.
Sub-prime and bad credit. Even if you have
less than perfect credit, possibly with some
current late payments, you may be able to
refinance your home loan on a cash out
basis. Almost every lender has some unique
features to their lending programs, so be
prepared to shop. Mortgage brokers do
sometimes specialize, however, most are able
to sell the programs of several lenders.
This can be especially helpful, if you have
a difficult situation.
As with any
residential mortgage loan....
Do not
make assumptions. If you are unsure about
anything...
ASK YOUR MORTGAGE COMPANY QUESTIONS!
4. Do not
assume that the mortgage interest of this
loan will be tax deductible. Consult a
qualified tax advisor for potential tax
benefits.
5. Inquire about all fees and costs
associated with this loan, including the
mortgage rate and APR (annual percentage
rate) and whether the interest rate will be
fixed or adjustable (ARM - Adjustable Rate
Mortgage).
6. Be sure to ask if there is a
pre-payment penalty for paying off the loan
too early or making substantially large
payments against the principal.
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