Rate & Term Refinance Loans In Arizona

An Arizona rate and term refinance loan is a refinancing transaction in which an existing mortgage is replaced with a new one to adjust the interest rate, the loan term, or both. This method does not require additional money to be advanced on the loan. It is frequently used in response to falling market interest rates to lower monthly mortgage payments.

Pros and Cons of a Rate and Term Refi

The decision to pursue a rate-and-term refinance loan should be based on a thorough evaluation of your financial objectives, market conditions, and the associated costs. Before making such significant financial decisions, it is always prudent to obtain professional advice.

Advantages of a Rate and Term Refinance Loan

• Lower Interest Rate

If market conditions or your creditworthiness have improved significantly after you obtained your mortgage, you can get a reduced interest rate through a rate and term refinance. This may lower your monthly payments and save you money over time.

• Adjusted Loan Term

Depending on your financial objectives, you can choose to shorten or lengthen the term of your loan. Shortening the loan term may result in higher monthly payments but less overall interest paid, whereas prolonging the term may result in lower monthly payments but greater general interest paid.

• No Cash-Out

Unlike a cash-out refinance, a rate and term refinance do not advance any additional money. This generally results in a lower interest rate because the lender is not exposed to the same risk.

Disadvantages of a Rate and Term Refinance Loan

• Closing Costs

Closing costs for refinancing a loan can run into thousands of dollars. Unless you plan to stay in the house long enough to recuperate these fees, these costs outweigh any possible savings from a lower interest rate or a different loan term.

• Longer Amortization

Though you choose to extend the loan term, even though the interest rate is lower, you may wind up paying more interest throughout the life of the loan.

• Current Market Conditions

Refinancing may not be advantageous if interest rates are much higher than your current rate. 

Rate & Term vs. Cash-Out Refi

Both rate and term refinance and cash-out refinance are mortgage refinancing strategies for homeowners. However, they serve different goals and have distinct differences:

• Purpose

  • Rate and Term Refinance

The primary purpose of a rate and term refinance is to take advantage of a lower interest rate or adjust the loan term to cut monthly payments or shorten the loan term.

• • Cash-Out Refinance

A cash-out refinance’s principal goal is to turn home equity into cash, allowing the homeowner to use the money for other purposes. This is accomplished by taking out a new loan more significant than the previous mortgage and cashing out the surplus funds.

• Loan Amount

  • Rate and Term Refinance

In a rate and term refinance, the new loan amount typically covers the remaining balance of the previous mortgage. The loan amount is within the existing balance to meet related charges such as closing costs if necessary.

• • Cash-Out Refinance

The new loan amount is greater than the remaining balance on the existing mortgage in a cash-out refinance. The homeowner receives cash for the difference between the new loan amount and the current balance (less transaction expenses).

• Equity

  • Rate and Term Refinance

This usually does not necessitate a significant amount of equity in the home. Refinancing may be advantageous if the homeowner can obtain a better interest rate or term.

• • Cash-Out Refinance

Because the homeowner is borrowing against the equity, substantial equity in the property is required. The amount of equity needed varies depending on the lender and loan type.

• Use of Funds

  • Rate and Term Refinance

The money from a rate and term refinance is often used to pay down the original mortgage and any associated refinancing expenses.

• • Cash-Out Refinance

The extra funds from a cash-out refinance (over and above the actual mortgage payoff) can be utilized for whatever the homeowner desires, such as home upgrades, debt consolidation, or other substantial expenses.

While both types of refinancing might provide financial benefits, they also entail hazards, such as the prospect of rising interest charges over time or the chance of losing your home if you cannot repay the loan.

Apply for a Rate and Term Refinance in Arizona

There are numerous reasons why Arizona homeowners should consider Capital Home Mortgage for rate and term refinancing. Capital Home Mortgage provides competitive rates that could reduce your current mortgage’s interest rate, resulting in substantial savings over the loan term. In addition, Capital Home Mortgage is well-known for its low closing costs, which can reduce the total cost of refinancing.

Call (480) 360-6650 to speak with our Home Loan Specialists about your refinancing needs.