Taking out a mortgage to finance the purchase of a home is a substantial financial commitment, and fortunately, the original terms of your loan don’t always have to be permanent if you refinance your mortgage. A rate and term refinance is an option that can end up saving borrowers a significant amount of money over time. If you decide to update your mortgage with a rate and term refinance, you can essentially replace your older mortgage with a new one that better suits your current needs. If you are interested in learning more about your refinancing options in Jacksonville, Florida, North Star Mortgage Network, Inc. can help. Read on to learn more about rate and term refinancing.

How Does a Rate and Term Refinance Work?

There are two main types of refinance options; cash-out refinance, and a rate and term refinance. In a cash-out refinance, a borrower can take out a mortgage for a larger amount than their current mortgage, keeping the excess cash payout and using it to pay off outstanding debt, make repairs or renovations on a home, etc. On the other hand, with a rate and term refinance, a borrower replaces their existing mortgage with no cash payout involved. Instead, the loan is refinanced with better mortgage terms and a lower interest rate. Basically, in a rate and term refinance, the existing loan is paid off by the new one, and the old loan balance is transferred to the new mortgage.

What Are the Benefits of a Rate and Term Refinance?

There are several benefits to obtaining a rate and term refinance, including the opportunity to pay off your mortgage more quickly, the opportunity to pay lower interest rates, and the opportunity to get more favorable terms, which will result in lower overall monthly mortgage payments. By extending your loan terms with a rate and term refinance, you can lower your monthly payment amounts, and conversely, if you decide you want to pay your mortgage off more quickly, you can arrange for your monthly payments to become higher. Additionally, in certain cases, a rate and term refinance can help you eliminate mortgage insurance. As with any refinance, it is important to note that you will be required to pay certain associated fees, including the cost of a home appraisal and closing costs.

Rate and Term Refinance Requirements

Some typical requirements for a rate and term refinance include:

• A credit score of at least 620 or higher.
• A debt to income, (DTI), of 50 percent or lower.
• You will want to have some of your existing mortgage paid off. Having at least 20% home equity is ideal.
• Paying necessary refinancing fees and closing costs will be required

If you are interested in exploring your refinancing options in Jacksonville, Florida, and want to know more about rate and term refinancing, contact North Star Mortgage Network, Inc. today for a consultation.