A cash in refinance is the opposite of a cash out refinance! Over the last few years, many people refinanced their homes and took equity out of them to pay off credit cards, cars and other items. Now due to current values and mortgage changes, many people are refinancing their homes and putting cash into the transaction! In order to lower their payment or due to the appraised value, they have decided to pay money towards lowering their mortgage balance in order to lower their payment.
Some homeowners are looking at their mortgage and know their home is a good investment in the long run, they have been saving money and want to put it towards the principal balance of their mortgage. This may allow them to refinance at a lower interest rate and lower their monthly payment. They may also be looking at selling down the road and want to be prepared for a lower sales price.
Due to lower property values, many people have had to look at bringing money to closing on a refinance. Freddie Mac said that the last quarter of 2010, almost half of the people refinancing brought money to closing. Some are doing it to avoid paying mortgage insurance and others are doing it to avoid jumbo mortgage rates. For some homeowners, they may be getting 1-3% on a money market and by lowering their mortgage amount, they are actually saving money since they are paying less interest on their mortgage.
The banks like it as they have less risk in the home – the lower the mortgage amount, the better for the bank – which will also allow for lower interest rates. That is especially true with the new price adjustments for Fannie Mae loans starting in the next couple of months.
If you are thinking about refinancing and are concerned about the value of your home, this may be something to think about if you have the money available. You will need to look at all your options and decide if it makes sense to use the cash – but it is an option that many people are looking at.
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email – Website
