Things You'll Need:
- A Home Mortgage
- Refinance Mortgage Needs
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Step 1
First, understand what rate and term refinancing is. Some of the most common reasons given for obtaining refinance mortgage loans are that the consumer wants to lower their monthly mortgage payments, pay the balance of their mortgage faster, and/or reduce how much interest they are paying every month. For these homeowners, the goal is to keep their mortgage loan balance the same while changing the method in which their mortgage loan is paid. This refinance process is known as rate and term refinancing.
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Step 2
Second, understand what cash-out refinancing is. For other homeowners, however, the consumer needs to take advantage of different forms of refinance mortgage programs. Cash-out refinancing, also called "refinance with cash out", is one form of such mortgage refinance programs. Unlike rate and term refinance loans, cash out refinance loans involve obtaining a new home mortgage with a larger mortgage than the homeowner's existing mortgage loan.
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Step 3
Finally, decide which method (e.g., rate and term refinance versus cash out refinance) best suits your home mortgage needs. Make a list of your mortgage refinance goals. If your goal is to utilize your home equity to satisfy other obligations, cash out refinancing is the way to go. If, however, your goal is to lower your monthly mortgage payments, rate and term refinancing is your best option.
