:: Refinancing Details (NEW)

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Summary
A Refinance mortgage loan is a mortgage whose proceeds are used to pay off an existing mortgage (or mortgages). The Refinance cancels the existing promissory note(s) and executes a new promissory note for the current borrower.

Common Use of Refinance Loans
There are several reasons why someone obtains a Refinance loan. Quite often the reasons involve taking advantage of a lower interest rate, or to elongate the existing debt against a house. When going to a lender to obtain a Refinance loan the loan to value assessed is based on the appraised value of the subject property regardless of the date the property was purchased and initially financed. There are closing costs involved in obtaining a Refinance loan.

The typical types of Refinance loans include: rate/term refinance and cash-out refinance. Each type of Refinance loan accomplishes a different result. Here are some details on both.

• Rate/Term Refinance
  The purpose of a rate/term refinance is to change to a lower interest rate or change the term of a loan without advancing new money on the loan. Closing costs can be rolled in. The borrower may receive a maximum 1% of the loan amount in cash at closing.

• Cash-Out Refinance
  The purpose of a cash-out refinance is to take cash out/away from the refinance by advancing new money on the loan. The cash taken from the refinance may be used for any purpose you choose (examples include: debt consolidation, credit card payments, buying a new car or towards the purchase of another property). Closing costs can be rolled in to the refinance loan (that is included as part of the total borrowed).
  
  Note: When the borrower receives more than 5% of the loan proceeds in cash at closing, the borrower may be required to provide a letter explaining the purpose of the cash-out.

Further Details
Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to pay off other debts, to reduce the home loan's monthly payments (sometimes by taking a longer-term loan), reduce risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to liquidate some or all of the equity that a consumer has taken against their property The rule of thumb is that lenders lend up to about 75% of your home's equity. Your home's equity is measured upon how much of your mortgage remains, and how much the home/property is valued at in the market.

Some home loans contain early payment penalties that occur when a borrower pays off his/her home loan before its final payment date. Also, some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance such as raising property tax after refinancing which varied by regions.