The process of paying off one loan with the proceeds from a new loan, using the same property as security. Cash received by the borrower at closing may not exceed $2,000. In Texas you are never allowed to receive cash at closing on a rate term refinance of your primary home.
In other states they do have a limited cash out up to $2K on a rate term but not in Texas.
A good time for a rate and term refinance is when interest rates are significantly lowered.
A rate and term refinance can also be beneficial when nearing the end of the fixed-rate guarantee of an adjustable-rate mortgage.
Do you have 20% equity in your home when you didn’t before? If so, you can probably eliminate private mortgage insurance (PMI). Plus, although a rate and term refinance doesn’t have home equity requirements, 20% equity qualifies you for the most favorable rates.
With a cash-out refinance, you take equity out of your home, which increases your debt, while a rate and term refinance does not.
Although it’s allowed elsewhere, Texas is not a state where you can get some cash out of a rate and term refinance. Here, if you need cash, you need a cash-out refinance.
In addition to securing a lower interest rate, rate and term refinance benefits could include lower monthly payments, changing term lengths for a quicker mortgage pay-off or changing your loan type.
Feel free to contact us with other questions at any time.