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.
Often clients want to know when it the right time for a cash-out refi consider the following factors then give us a call:
Have the interest rates dropped significantly since your last refi?
Are you planning on staying in the home for a substantial amount of time?
Is there an option to shorten the loan term?
FIXED-RATE vs ADJUSTABLE-RATE MORTGAGES
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.
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)
These loans are usually referred to as 3/1, 5/1, 7/1, and 10/1 ARMs
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.
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.
At the end of the "fixed” period, your interest rate is determined by your index and margin clearly noted in your mortgage or note.
Adjustable Rate Mortgages generally have lower initial fixed interest rates than your conventional fixed rate mortgages.