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CHAPTER XIV -- MANAGING YOUR MORTGAGE

LESSON 29: REFINANCING

There are reasons to refinance even if doing so won't lower your payment much and will take a long time to pay off. You may want to convert from an ARM to a FRM to eliminate drastic payment fluctuations. Or, you might want to convert from a 30-year loan to a 15-year one in order to build equity more quickly. Borrowers who need money to pay college tuition or pay off other debts can convert some of their equity into cash via a cash-out refinance.

Refinance options:
1) Rate-and-term refinance:A rate-and-term refinance is the process of paying off one loan with the proceeds from a new loan using the same property as security. A rate-and-term refinance takes advantage of lower interest rates, or a shorter term to build equity faster.

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2) Cash-out refinance: A refinance transaction in which the amount of money received from the new loan exceeds the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens. In other words, a refinance transaction in which the borrower receives additional cash that can be used for any purpose. Generally, your cash-out refinance is limited to 75 percent of the total value of your home.

As for the actual lending process, refinancing your current mortgage is very similar to getting a loan to buy a home. It involves many of the same steps and the same types of closing costs. Borrowers who don't have spare cash lying around need not despair. They can agree to pay higher rates in exchange for having their lenders pay their costs or increase their new loan balances enough to pay those costs at closing. Doing either of these things, however, will increase the total interest cost of the new loan.

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TABLE OF CONTENTS

CHAPTER I
  Lesson 1
  Quiz

CHAPTER II
  Lesson 2
  Quiz

CHAPTER III
  Lesson 3
  Lesson 4
  Lesson 5
  Quiz

CHAPTER IV
  Lesson 6
  Lesson 7
  Quiz

CHAPTER V
  Lesson 8
  Lesson 9
  Quiz

CHAPTER VI
  Lesson 10
  Lesson 11
  Quiz

CHAPTER VII
  Lesson 12
  Lesson 13
  Lesson 14
  Quiz

CHAPTER VIII
  Lesson 15
  Lesson 16
  Lesson 17
  Lesson 18
  Quiz

CHAPTER IX
  Lesson 19
  Quiz

CHAPTER X
  Lesson 20
  Quiz

CHAPTER XI
  Lesson 21
  Quiz

CHAPTER XII
  Lesson 22
  Lesson 23
  Lesson 24
  Quiz

CHAPTER XIII
  Lesson 25
  Lesson 26
  Lesson 27
  Quiz

CHAPTER XIV
  Lesson 28
  Lesson 29
  Lesson 30
  Quiz

Definitions





RELATED STORIES

What will refinancing do for you?

Original lender's often the best source for refinancing

Protect yourself against mortgage scams and screw-ups

Cash-out mortgage refinancing vs. refinancing plus a home equity loan

 
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