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REFINANCING OPTIONS
CASH-OUT REFINANCE OR DEBT CONSOLIDATION
A cash-out refinance replaces your current mortgage with another loan that pays off your current mortgage and allows the equity in your home to provide funds for other purposes.
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TIMING
Often clients want to know when it the right time for a cash-out refi consider the following factors then give us a call:
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Have the interest rates dropped significantly since your last refi?
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Are you planning on staying in the home for a substantial amount of time?
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Is there an option to shorten the loan term?
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FIXED-RATE vs ADJUSTABLE-RATE MORTGAGES
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FIXED RATE
Fixed-rate mortgage are the most conservative loan option where principal and interest portion of the monthly payment never changes. Repayment terms can range from 10 to 30 years. ​
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ADJUSTABLE-RATE MORTGAGES
Also known as ARMs, if explained properly and used with a careful plan, are a great way to minimize monthly payments and maximize returns on investment. ARMs also have an interest-only option where you only have to pay your interest, and therefore lowering your monthly payment.
UNDERSTANDING ADJUSTABLE-RATE MORTGAGES (ARMs)
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These loans are usually referred to as 3/1, 5/1, 7/1, and 10/1 ARMs
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The first numbers above (3, 5, 7, and 10) represent the number of years your loan will be "fixed”, where your interest rate and payment will NOT change.
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The second number, ( 1 ) signifies that after the "fixed” time period, your mortgage rate can be adjusted upward or downward ONE time every year. In the case of "5/1”, after the fifth year, your mortgage rate can be adjusted one time every year.
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At the end of the "fixed” period, your interest rate is determined by your index and margin clearly noted in your mortgage or note.
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Adjustable Rate Mortgages generally have lower initial fixed interest rates than your conventional fixed rate mortgages.