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Types_of_Mortgage_Refinance_Loans

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					Title:
Types of Mortgage Refinance Loans

Word Count:
551

Summary:
Technically, you can take out any kind of loan and use your loan proceeds
to pay off your mortgage.


Keywords:
finance, loan, dept, home, consolidation


Article Body:
Technically, you can take out any kind of loan and use your loan proceeds
to pay off your mortgage. Viewed this way, any type of loan can be a
mortgage refinance loan. However, some have restrictions (i.e. some
loans do not offer a big enough credit for paying off a mortgage) so they
don’t make good refinance loans.

This article is about the loans you can use for refinancing your
mortgage. Since these are loans that banks have specifically designed
for paying off mortgages, they are also known as the common types of
mortgage refinance loans that are available in the market.

According to Variability of Interest Rate

Fixed-rate mortgage refinance loan: This type of home refinance loan is
one where the interest rate is locked-in to a fixed amount for the whole
duration of the loan. Simply put, the home refinance loan will be kept
at a constant interest rate for the whole life of the balance.

Variable-rate mortgage refinance loan: This type of home refinance loan
is one where the interest rate varies with a certain, predetermined
index. The interest rate, in this case can be equivalent to the index or
greater than the index by a fixed margin. In this type of mortgage
refinance loan, there is usually an introductory rate period where the
interest rate is fixed for a few years (3 and 5 years are common) at a
very low rate. After this introductory period has passed, the rate
becomes a true variable rate – subject to the whims of the market.
However, there’s usually a cap or interest rate ceiling to protect the
consumers from excessive index rate increases.

According to Payment Terms

Interest-only mortgage refinance loan: This type of mortgage refinance
is one where you will be asked to pay only the interest for a certain
period of time. After the set interest-only payment period has passed,
you will have to start making payments towards the principal.

Balloon-type mortgage refinance loan: This type of refinance loan is one
with an initially low, fixed interest rate (the actual period varies from
lender to lender but this period doesn’t usually exceed 10 years). After
the period for the low interest has passed, however, full payment is
required on loan balance.

Fully-amortizing mortgage refinance   loan: This type of refinancing loan
is one where monthly payments are a   combination of interest charges and
payments towards the balance. This    type of loan is ideal for people who
wish to add to their equity as well   as reduce the balance with every
payment.

Home equity mortgage refinance loan: This type of loan is one where you
actually apply for a loan using the equity you have stored in your home
as your security for the loan. In this case, you give up your equity for
money which you can get as outright cash or as a revolving credit line.
Such a loan usually has a very good interest rate. However, this type of
loan is ideal for mortgage refinancing ONLY if you have enough equity in
your home to pay off your original mortgage lender. This can happen if
your home has appreciated considerably. If you don’t have enough equity
to pay off your original lender, you will only be taking on a second
mortgage, not a refinancing loan.

				
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