Purchasing a home with a mortgage is a long term and serious commitment. Fortunately, if you experience changes in your life, you have options to change your mortgage to adapt to your situation. Refinancing allows you to replace your current mortgage with a new one that works better for your lifestyle. A rate and term refinance changes your interest rate, your mortgage term, or both. If you are located in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and are interested in refinancing your mortgage with a rate and term refinance, contact Foundation Mortgage today. We can help to determine the best refinancing option for your situation.
The Basics of a Rate and Term Refinance
There are two main types of refinancing options; a rate and term refinance, or a cash out refinance. In a rate and term refinance, you can change the terms of your current mortgage and replace them with new terms that are more favorable for your situation, whereas in a cash out refinance, you can replace your current mortgage with a higher amount and receive the difference in a cash payout. Some homeowners choose to refinance with a rate and term refinance in order to receive a lower interest rate or to change their monthly payment. Another reason borrowers opt for a rate and term refinance is because a change in their life makes a longer or shorter term more preferable. For instance, if a borrower has an increase in income from a raise in salary and wants to pay off their mortgage faster with higher monthly payments, or conversely, if a borrower runs into financial hardship, such a divorce or a layoff, and needs to extend their monthly payments at a lower amount, a rate and term refinance would be beneficial.
There are many benefits to obtaining a rate and term refinance, including more favorable terms, lower interest rates resulting in cheaper monthly payments, and the potential to pay your mortgage off more quickly. It is important to note that there are additional costs associated with refinancing, including closing costs and a home appraisal.
Rate and Term Refinance Requirements
When applying for a rate and term refinance, there are some eligibility requirements to consider, including:
- You must have a credit score of at least 620
- A debt-to-income, (DTI) ratio of 50% or lower
- It is ideal to have some of your current mortgage already paid off. Having at least 20% equity or more in your home is ideal.
- You will need to pay for closing costs and other fees associated with the refinance
Getting Help With Rate and Term Refinance
There are many factors to consider when refinancing your mortgage. If you have further questions about refinancing your home with a rate and term refinance in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage today. Our loan specialists can help determine the best refinancing option for you. Contact us today for a consultation.
