CONVENTIONAL
Refinance Options

A conventional refinance is a type of mortgage refinancing that allows homeowners to replace their existing mortgage with a new loan that isn’t backed by a government agency like the FHA or VA. Instead, it’s provided by private lenders and often follows the guidelines set by Fannie Mae and Freddie Mac. Conventional refinances can help homeowners secure better loan terms, lower interest rates, or access the equity they’ve built in their homes. There are two main types of conventional refinance options: rate and term refinance and cash-out refinance.

Rate and Term Refinance
A rate and term refinance focuses on improving the terms of your existing mortgage by either lowering your interest rate, adjusting the loan term (length), or both.

– Lower Interest Rates 
Refinancing to a lower interest rate can significantly reduce the total interest paid over the life of the loan and lower your monthly mortgage payments.

– Adjust Loan Terms
Homeowners can also shorten or extend their loan term. For example, refinancing from a 30-year mortgage to a 15-year mortgage can help you pay off your loan faster and save on interest. However, this may result in higher monthly payments. On the other hand, extending your term can reduce monthly payments, although you’ll pay more interest in the long run.

This type of refinance is ideal for homeowners who are focused on improving their current financial position without taking out additional cash from their home equity. It’s commonly used to lower monthly payments or pay off the mortgage sooner.

Cash-Out Refinance
A cash-out refinance allows homeowners to tap into their home equity by replacing their existing mortgage with a larger loan and receiving the difference in cash.

– Accessing Home Equity
With a cash-out refinance, homeowners can borrow more than what is owed on the current mortgage and take the extra cash for other purposes, such as home improvements, debt consolidation, or major expenses.

– Loan Terms and Interest Rates
While you’re tapping into your home equity, you can also benefit from adjusting your loan terms or securing a better interest rate. However, because the loan amount increases, the monthly payments might rise as well.

A cash-out refinance is a good option for those who need access to funds and prefer leveraging their home’s value to meet financial goals. It’s important to weigh the benefits of having extra cash against the risks of increasing your mortgage balance and potentially paying more in interest over time.

Which Option is Best for You?
Choosing between a rate and term refinance and a cash-out refinance depends on your financial objectives. If you’re primarily focused on lowering your payments or paying off your loan faster, a rate and term refinance might be the better choice. If you need cash for personal expenses and have sufficient equity in your home, a cash-out refinance could be a smart solution. Either way, consulting with a mortgage professional can help you identify the best option based on your unique needs.