An interest only refinancing loan is a great way for savvy homeowners to maximize their cash flow. Interest only refinancing loans are different than a tradition refinancing loan. With a traditional refinancing loan, you pay both the principle of the loan and the interest of the loan. With interest only refinancing loans, the homeowner is given the option of paying both the principle and interest of the loan or only the interest, using the extra money that would have been spent on the principle to purchase or invest for other things.
Interest only refinancing loans can be very similar to traditional refinancing loans. For instance, both types of mortgages usually have the same interest rate, so you don’t usually save from one product to another and you can take out an interest only loan with either a fixed rate or adjustable rate.
For the most part, most interest only loans allow the borrower to choose between paying both the principle and interest or just the interest for a set term. For instance, your interest only loan will give you the option for the first 10 years of the loan. After 10 years have passed, you must always pay both the principle and interest.
Advantages of Interest Only Refinancing Loans
The main advantage of an interest only refinancing loan is that the homeowner can maximize their cash flow from month to month. For instance, need a few extra dollars one month, forgo paying the principle, some savvy homeowners even forgo paying the principle and instead take that money and invest it into their 401K or other investment vehicles.
Another advantage of these types of loans is for homeowners that intends to sell their home before the end of the loan term. Having extra cash flow when you need it can be a great way to buy the things you need most and since you will be moving before the end of the loan, with the sale of the home and its built up equity, you can easily repay your loan.
While interest only refinancing loans can be a popular alternative, they are not without risk. For those that rely on not paying the principle due to the fact that they have trouble paying their mortgage completely, this can signal trouble ahead. Make sure that if you choose this type of loan, you can handle the perks. Make sure you have control of your finances and refrain from digging yourself in a hole.
By: Connie Barker
Posts Tagged ‘Cash Loans’
Interest Only Refinancing Loans
January 23rd, 2010California Cash Out Refinance Mortgage Loans
January 3rd, 2010
Are you looking to pull some extra cash from your home? If you’ve built up equity in your home then you can most likely refinance and get cash out when you need it.
With a new cash out refinance mortgage loan, you can turn your home equity into cash for just about any purpose.
Here’s how a cash out refinancing loan works. Let’s say your home is worth $300.000 and you still owe $200.000 on the existing mortgage. The difference of $100.000 is the home equity available to you.
It’s up to you to do whatever you want with the money from your home refinance. A good way to use it is to consolidate any high interest debt you might have. The interest rate on a cash out refinance loan can be as low as 6%, and you’ll get tax benefits too because the debt is part of your home mortgage.
In most cases, a California homeowner can refinance up to 100% of their home value. You may be able to keep your monthly payments the same or even lower them. The length of your loan payback period will determine your monthly payment amount.
Even if you have bad credit you can still qualify for a refinance loan, since your home is used as collateral. But don’t forget that you could wind up losing your home if don’t make your payments.
Cash out refinancing can be a smart thing to do. You can pay off debt, improve your home, pay for education, or even start a home business with the money you get from your home.
By: Frank W Ellis
Cash Out Refinancing Loans Vs Home Equity Loans
November 18th, 2009
One of the products that some homeowners find confusing is the Cash Out Refinancing Loan. Many people use Cash Out and Home Equity Loan interchangeably; however they are different loan products with some similarities. Here is some information on both of these types of loans.
Cash Out Refinancing
A cash out refinancing loan is part of the umbrella of refinancing loan products. A refinancing loan is a new loan to pay off an older loan, using the same property as collateral. With a cash out refinancing loan, you can “cash out” the equity of your home that has appreciated over the years. For instance, if your home is appraised at $200K and you only owe $100K on the original mortgage, you have $100K of equity built up. A cash out refinancing loan allows you to refinance the loan and also let you access some of the equity built up. In the above case, you can refinance your home for a total of $150K, cashing out $50K of equity.
Home Equity Loan
A home equity loan is different from a refinancing loan; it is a second mortgage that is secured using your home as collateral. The original mortgage is still in place. With a home equity loan, you do not refinance your home, but just cash out the equity. If you are happy with the interest rates or current terms of your mortgage and would just like to have access to your equity, a home equity loan is the right choice.
Pros & Cons
For homeowners that need quick access to their equity, a home equity loan is the much quicker way to access it. While a cash out a refinancing loan can take several weeks or more than a month to close, some home equity loans can close in as little as one week.
Another advantage of the home equity loan is that there are usually lower fees involved. You are usually not required to pay points, but only normal closing and administration fees.
If you are interested in repaying your loan over the long haul to reduce your monthly payment cash out refinancing loans is your best option. Most loans in this category have 15 year or 30 year terms and a low rate.
If you are looking for the lowest rate for a loan, the cash out refinancing loan is typically more competitive than a home equity loan. However, most refinancing loans include points that can make these rates less attractive.
By: Connie Barker