A rate and term refinance is when a borrower refinances to lower the interest rate and/or term of their current mortgage.
A rate and term refinance would not include a debt consolidation refinance or a cash out refinance.
Rate and term refinances can also include paying property taxes that are due without being classified as a cash out transaction.
Usually people do a rate and term refinance because they want to lower their monthly mortgage payments. Having a lower interest rate, and spreading your payments out over a longer period of time, equates to paying less each month.
Most lenders will allow a maximum of $2,000 to the borrower when doing a rate and term refinance. Anything over that $2,000 number, and it is considered a cash-out refinance.
Generally speaking, a rate and term refinance poses less risk to the lender so may be easier to qualify for than a cash out refinance.
Lenders sometimes give borrowers lower rates when they only do rate and term refinance. Cash-out refinances are considered riskier loans so some lenders add onto the base rate to compensate for this risk.
With all the changes in the Mortgage industry today, take the time to sit down and get the facts. The Team at Northeast Funding are here for you. Call today for more information.
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