Refinancing is very similar to the initial securing of a home loan. Refinancing, however, may provide you with more flexibility. More flexibility will lead to higher interest rates on your new loan. There are two types of refinancing you should be aware of:
- Cash-out refinancing
- Rate-and-Term refinancing
What is Cash-Out Refinancing?
This type of refinancing will leave you with extra cash after you have paid off closing costs and other similar fees. This extra money can be used for anything you want. There is a limit, however, on the amount you can refinance - only up to 75% of the current value of your home. If you need more than this, private mortgage insurance will be necessary before the loan is approved.
What is Rate-and-Term Financing?
This type of refinancing takes the income from the new loan and applies it to another loan paying it off using your home as collateral. The benefits of this loan include a shorter term mortgage period and lower interest rates. This can lead to faster equity building.
Can I Use Refinancing to Avoid Foreclosure?
Yes. Refinancing is one of several ways to avoid foreclosure. Refinancing for this reason will leave you with much higher interest rates, but it will provide you with much needed time to either sell your home or gather more money to get back on the right track.
Should I Consult a Lawyer about my Mortgage Issues?
Buying and financing a piece of real estate can be one of the most burdensome financial decisions you make. A bankruptcy attorney can advise you of the different mortgage financing options for this financial endeavor. An attorney can also review any financial documents, and advise you concerning your obligations and the best way to proceed.