Mortgage Terms 101: Understanding 'Cash-Out Refinancing' and How to Determine if It's Worth It

With interest rates remaining near historic lows for the past several years, many of your friends and neighbors may have already told you that they have refinanced their home mortgages once or even a couple of times. A cash-out refinance can provide you with several important benefits, but it is not the best option for all homeowners. By learning more about what a cash-out refinance is and what the pros and cons of this type of refinance loan are, you can make a decision that is best for your current and future plans.

What Is a Cash-Out Refinance?

When you refinance your home mortgage, you can select a rate and term refinance which does not pull equity out of your home, or you can select a cash-out refinance to access some of the equity in your property. You can research your property value and your outstanding principal balance to determine how much equity you have available. Keep in mind that most lenders will not allow you to access all of the equity, and you can obtain more information about the loan amount you may qualify for by speaking with a mortgage professional.

The Benefits of a Cash-Out Refinance

If you decide to apply for a cash-out refinance loan, you may be able to walk away from the closing table with tens of thousands of dollars or more. This is money that you may use for any purpose, including home improvements, paying off high interest rate credit cards, sending the kids to college and more. In addition, you may enjoy other benefits from refinancing, such as lowering your interest rate and mortgage payment and adjusting your loan term to meet long-term goals.

When a Cash-Out Refinance May Not Be Advisable

A cash-out refinance loan can be beneficial, but there are instances when it is not the best solution. The loan will adjust principal reduction, the loan payoff date, the interest charges and other factors. The adjustment of these factors may make your new loan less advantageous for you in some cases, so you should carefully consider the full impact of refinancing before you decide to move forward.

From learning more about the benefits of refinancing to finding a competitive rate for your new mortgage, there are many factors to consider. You can speak with a mortgage professional today to inquire about the cash-out refinance loan terms that you may qualify for and to explore the options in greater detail. If you are thinking about applying for a cash-out home loan, contact a lending representative today.

An Insider's Guide to Reducing Your Remaining Mortgage Years Through a Smart Refinance

Is it always the best idea to pay off a mortgage over 30 years? While it may help a homeowner lower his or her monthly payment, it can mean paying more in interest and waiting several more years to build sufficient equity in the home.

The question is...how can a homeowner reduce the amount of time it takes to pay off a mortgage by refinancing his or her loan? A few methods for reducing your mortgage term are explained below.

Refinance From A 30-Year Mortgage To A 15-Year Mortgage

For those who don't want to wait any longer than necessary to pay off their home loan, it may be possible to refinance to a shorter-term mortgage. Instead of taking 30 years to pay off the loan, a homeowner can opt to pay off the loan in 10 years or 15 years. The shorter the term, the less interest will be paid on the loan.

Get A Lower Interest Rate With A Shorter-Term Mortgage

Another good reason to shorten a mortgage term is because it could lower the loan's interest rate. Instead of paying 4.5 percent over 30 years, it may be possible to pay 4 percent over 15 years. This gives the mortgage holder the chance to build equity in the home faster as they are paying more of the principal balance with each payment. While a mortgage holder can pay more than the minimum amount on a longer-term mortgage each month, it could still end up costing more overall due to the terms of the loan. Be sure to ask your mortgage professional about your options here.

Stop Paying Mortgage Insurance

Those who are paying mortgage insurance could be paying $200 or more per month for nothing more than the right to protect the lender against default. Homeowners who could qualify for a conventional loan should attempt to refinance to a conventional loan if possible to avoid making this payment. Instead of going toward mortgage insurance, put that money toward the principal balance on the loan. There are, of course, risks involved with this approach so be sure to fully discuss them with a professional.

How Can Someone Refinance A Loan?

Now that you know how to pay off your mortgage faster through a refinance, how can someone go about refinancing a home loan? Fortunately, refinancing is similar to the process of securing the home's first loan. All a borrower will need to do is find a lender that he or she wants to work with, find an offer that works for that borrower and then close on the deal. Although there may be closing costs associated with the new loan, some lenders may be willing to waive some or all of them on a refinance.

Paying off a mortgage as soon as possible can help a borrower save money while building equity in the home at a faster pace. This gives a homeowner financial strength as well as the flexibility to sell the house in the future without worrying about losing money in the deal. To find out more about refinancing options, talk to a mortgage lender.

Gulf War Veterans And Active Military Personnel Push FY 2012 VA Loan Guarantees To Record-Levels

In 1944, the government passed the G.I. Bill, a law which provided a wide range of benefits to U.S. soldiers returning from World War II. One of the G.I. Bill's programs -- the VA Loan Guaranty -- awarded veterans with at least 90 days of active duty during the war years access to low-cost mortgages nationwide.

Nearly 70 years later, the VA Loan Guaranty program has been used more than 20 million times. The Department of Veterans Affairs program continues to help eligible military borrowers purchase, refinance and renovate homes in all 50 states and the District of Columbia.

In 2012, more than $119 billion in VA loans were funded nationwide and World War II veterans continue to benefit from the program -- 684 VA loans were made to World War II vets, specifically, last year.

VA Loans : Mortgages For Eligible Military Borrowers

The Department of Veterans Affairs administers the VA Loan Guaranty program. The agency doesn't make VA loans directly -- the loans are made by banks. The VA simply guarantees a portion of the loan, which protects the bank from loss.

Because of this guarantee, VA lenders can provide military borrowers with more favorable loan terms than for a non-guaranteed loan (e.g.; conventional mortgage).

There are five VA loan guaranty programs :

1. Purchase Loans, for the purchase of a new home
2. Cash Out Refinance loans, for taking cash from your home
3. Interest Rate Reduction Refinance Loans (IRRRL), for lowering your existing VA mortgage rate
4. Native American Direct Loan (NADL) program, for purchase, construction or improvement of homes
5. Adapted Housing Grants, for veterans with permanent and total service-connected disability

Each program can be used for the purchase of a single-family or multi-family home, including housing units in condominium buildings and co-ops. VA refinance loans can also be used for home renovation and energy-efficiency programs.

There is no official loan size limit with the VA Loan Guaranty program, but limitations can apply based on your area.

For example, VA borrowers in "high-cost" areas such as San Diego, California can borrow via the VA loan program than borrowers buying or refinancing near Dayton, Ohio's Wright-Patterson AFB.

When you get your VA mortgage rates, ask about your local loan size limits.  Check out our low rate refinance and home purchase options. Receive a free mortgage quote, it's Free, Fast, Easy and Secure.

Gulf War Veterans Top 2012 VA Home Buyers

The VA loan program is available to eligible military borrowers and surviving spouses and during Fiscal Year 2012 the VA guaranteed 539,884 home loans, marking a 51% increase from the year prior and a three-fold increase as compared to Fiscal Year 2008.

Ultra-low mortgage rates played a role.

The number of rate-reducing IRRRL mortgages more than doubled between FY 2011 and FY 2012, climbing from one-hundred thirty-six thousand to two-hundred eighty-one thousand. "Other" refinances also climbed sharply, adding to last year's final tally.

VA borrowers refinanced close to $62 billion via the IRRRL program, which is sometimes referred to as the VA Streamline Refinance. Rate reductions accounted for more than half of the VA-backed loans made last year.

Other interesting patterns emerge when we split the loan data by period of service entitlement.

First, Restored Entitlement loans outnumber all other entitlement types. This is because "Restored Entitlement" describes when VA loan has been paid in full via home sale, or when the homeowner agrees to assume the outstanding VA loan balance.

We should expect Restored Entitlement figures to be high in a recovering housing market. Veterans are move-up buyers, too, after all.

Second, Gulf War veterans comprised 28.5% of all VA loans guaranteed in FY 2012. This was the largest uniform class of service entitlement. The group of Gulf War veterans includes military borrowers with service dates from August 2, 1990 to the present.

Lastly, it's noteworthy that today's active military personnel accounted for 19% of last year's VA loan guarantees. Among all service classes, active personnel boasts the largest average loan size, registering $230,802 per VA loan.

Korean Conflict veterans showed the smallest average loan size at $160,584 per VA loan.

Check out our low rate refinance and home purchase options. Receive a free mortgage quote, it's Free, Fast, Easy and Secure.

The G.I. Bill provides subsidized mortgage lending, which is why VA mortgage rates are often so low as compared to conventional and jumbo mortgage rates. This is one reason why VA closings tripled between 2008 and 2012. Another reason is the VA's 100% financing.

With mortgage rates still low, VA loan guarantees remain in high demand. See what a VA loan can do for your budget. Get started with a rate quote today. It's fast, it's free, and no social security number is required.

The article Gulf War Veterans And Active Military Personnel Push FY 2012 VA Loan Guarantees To Record-Levels originally appeared on themortgagereports.com.