Rate & Term Refinance In Tacoma

Refinancing a mortgage entails replacing the existing terms of a mortgage loan with new, typically more favorable terms. Typically, borrowers refinance their mortgages to obtain reduced monthly payments, to adjust the loan’s duration, or to switch between fixed- and adjustable-rate mortgages. Refinancing is frequently prompted by fluctuations in interest rates, which can result in substantial cost reductions.

There are various refinancing options, including cash-out refinancing, which allows borrowers to access the equity in their house, and cash-in refinancing, which reduces the loan amount. Consolidation refinancing, in which numerous debts are consolidated into one, is another type of refinancing. Modifying the interest rate, paying off other mortgages, financing closing fees, co-owner buyout, and getting a small cash sum are all possible with limited cash-out refinancing.

What is a Rate and Term Refinance?

A rate-and-term refinance, sometimes known as a “no cash-out refinance,” is a type of refinancing that modify the interest rate or term of an existing mortgage without getting funds at closing. The primary goal of this technique is to reduce monthly payments, which falling market interest rates may influence.

The process enables homeowners to improve the conditions of their existing mortgage and save money on interest payments. They can also seek rate-and-term refinancing to lower their payments or establish better loan terms. This type of refinancing can assist in reducing interest payments, increasing equity, and eliminating the need for mortgage insurance.

Generally, a rate-and-term refinance is preferred when a homeowner’s credit score improves, market interest rates decline, or the homeowner’s adjustable-rate mortgage faces an increase in interest rates. It generally offers more favorable lending terms and entails less risk than a cash-out refinance, which involves taking equity out of the property and increasing the mortgage balance.

Rate and Term vs. Cash-Out Refi

Rate-and-term and cash-out refinance are two mortgage refinancing alternatives for homeowners based on their financial goals and circumstances.

• Rate and Term Refinance

A rate-and-term refinance entails exchanging your current mortgage terms for more favorable ones without increasing the loan amount. It enables a smaller monthly payment and possible interest savings. When interest rates fall, homeowners typically opt for rate-and-term refinances, resulting in lower interest payments and potentially a shortened loan term. Refinancing can also be advantageous if the homeowner wishes to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage or eliminate mortgage insurance. However, it is essential to note that rate-and-term refinancing may extend the loan terms and incur closing costs.

• Cash-Out Refinance

A cash-out refinance, on the other hand, increases the mortgage amount, allowing homeowners to withdraw cash from the equity in their house. It will enable homeowners to access their home equity by borrowing more than they owe and receiving the difference in cash. The extra revenue can be utilized for various purposes, including investing, retirement savings, and college money. This form of refinancing can also assist homeowners in repaying higher-interest debt while providing no tax benefits.

While cash-out refinancing can provide extra cash flow, it is usually more expensive than rate-and-term refinancing. Because they offer more risk to the lender, cash-out refinance loans often have higher interest rates than rate-and-term refinances. This is because the homeowner borrows more with a cash-out refinance, increasing the lender’s risk. Additional fees or higher interest rates may apply based on the homeowner’s credit score and equity proportion. In addition, there is the possibility of foreclosure and closing expenses, and private mortgage insurance may be required for loan-to-value (LTV) ratios greater than 80%.

Types of Rate and Term Refinance

Different rate and term programs are available depending on the type of loan a borrower needs. Among them are the following:

• Conventional Rate & Term Refi

A conventional rate and term refinance, also known as a rate and term option, is a type of refinance in which you may modify the terms of your existing loan to more advantageous terms. Lenders usually require a credit score of 620 or better.

• FHA Streamline Refinance

The Federal Housing Administration (FHA) offers a mortgage refinance product called an FHA streamline refinance loan. It enables you to replace your current FHA loan with a new FHA loan that has a lower interest rate, better terms, or a lower monthly payment than your existing FHA loan.

The term “streamline refinance” relates simply to the amount of documentation and underwriting the lender needs to undertake; it does not imply that the transaction is free of fees. Borrowers may choose not to provide income and credit documents in exchange for a reduced interest rate discount. The fact that a new appraisal is optional results in significant time and cost savings. Mortgages refinanced using the Streamline Refinance program may not be refinanced with cash.

• VA IRRRL

A VA Interest Rate Reduction Refinance Loan (IRRRL) is a mortgage refinance program for veterans with existing VA home loans. The program enables homeowners to refinance their debt at a reduced interest rate, reduce their loan term, or convert an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. The VA Streamline Refinance Program is another name for the IRRRL.

The terms VA IRRRL and VA Streamline are frequently used interchangeably. Lenders use the word “streamline” to imply that the IRRRL process is more straightforward and practical than other refinancing options.

• USDA Refinance 

A USDA refinance program enables you to replace your existing direct or guaranteed USDA loan with a new USDA loan. This can be done to benefit from reduced interest rates. The USDA provides three refinancing options: USDA streamlined assist refinance, USDA streamlined refinance, and USDA Rural Refinance Streamline Pilot.

The USDA streamlined-assist refinance is a popular choice that does not require an appraisal or income verification, and some lenders may not even need a credit check. This program offers the simplest method to refinance a loan for USDA mortgage holders.

To refinance a USDA loan, the current loan must have been paid on time for 12 months before the refinancing request. Before you can refinance a USDA loan that the federal government guarantees, you must wait 12 months.

Apply for a Tacoma Rate and Term Refinance

Capital Home Mortgage assists clients in acquiring the most suitable loan products for their particular needs. We work directly with you to ensure a seamless mortgage process from beginning to end. Additionally, as a direct mortgage lender, we can offer loans with flexible underwriting, competitive interest rates, and reasonable fees. 

Call 803-600-0088 to speak with our Tacoma Home Loan Specialists for your questions about rate and term refinance.