Refinances, when is it a good time to take advantage of the market.

Refinancing your mortgage can be a useful tool when trying to access your equity built up in your home or if you are just trying to take advantage of improved mortgage interest rate markets. Buying a home is one of the best things you can do for your future wealth building but managing the finances of a home are much easier than most people may think. Did you know that you can refinance your home with 2 different types of loans, rate/term refinance and cash out refinance. A rate/term refinance loan is where you just swap loans you get a new loan with favorable terms and payoff your current loan. Rate/term refinances can be beneficial to many homeowners looking to lower their mortgage payment or their mortgage term. Many homeowners utilizing rate/term refinances are typically in one of a few situations they are in a mortgage loan with a higher interest rate, a shorter mortgage term or they have an older mortgage that has been paid down for many years. Refinancing out of a mortgage loan with a higher interest rate is pretty obvious a homeowner is trying to achieve a lower mortgage payment by lowering the mortgage interest rate this is a simple cheap and effective way to keep your mortgage payments low and can be done at almost anytime the market rate is a half percent or lower than your current rate. Some home buyers opt for shorter mortgage term loans and this is a great way to accumulate equity in your home but it comes with a significantly higher monthly mortgage note. After a few years of making this payment some home owners feel the need to have a lower mortgage note usually to accommodate changes in their life, either new jobs or kids and sometime divorce regardless going to a 30 year mortgage can provide much needed relief. The same changes in life can also attribute people to wanting to refinance a thirty 30 mortgage note to a 20, 15, or 10 year mortgage term to start building equity quicker. Finally many people having lived in their home for many years and paid down their mortgage note may opt to get a new 30 year mortgage with the same or lower rate but a significantly reduced principal loan amount this will provide them a significantly lower mortgage payment and allow them to continue to live int he home that they love.

The second type of refinance is called a cash out refinance, this is a refinance loan that allows a homeowner the ability to take advantage equity in the home. These loans can be utilized by a home owner who has significant equity in a home, this loan will allow you to get a loan and receive a check or wire at closing. The cash out refinance loan does have some rules that apply to it for instance conventional financing requires 20% equity in the home before taking out one of these loans, meaning if your home appraises for $400,000 the max loan you could receive would be $320,000 so you would have to owe less than $320,000 to benefit from this refinance type. Also there is a homeownership seasoning period of at least 6 months passing from he purchase date tot he date of the new loan as well as if you have a loan on the home currently it would have to be seasoned with at least 12 monthly mortgage payments before you could pay it off and refinance into a cash out loan.