In this day or automation, bill paying online and Internet loan applications, one would think that conducting a refinance loan is the same, no matter what. However, there are three main types of refinances, so it is important to learn the difference if you are considering refinancing.

Rate/Term- This is the most basic refinance transaction that occurs, which ultimately simply lower the interest rate paid on the loan and pays off the existing mortgage balance only. Sometimes, the term may also be reduced. For example, an old loan with a 30-year term is paid off with a new loan that carries only a 15-year term. All closing costs are paid outside of the new loan by the borrower.

Limited Cash Out – This type of transaction is often confused with a rate/term refi, with the main difference being the fact that closing costs are often rolled into the new loan with a limited cash out refinance transaction. Additionally, Fannie Mae and Freddie Mac, two government sponsored agencies, will allow borrowers to obtain up to $2000 or 2% of the loan amount, whichever is less, back at closing in the form of cash. Both agencies have also determined that you can payoff an ex-spouse and still have the loan considered as a limited cash out refinance transaction, so long as the appropriate divorce papers are supplied to the lender.

Cash out/debt consolidation – With this type of refinance, consumers are often looking to get cash back or payoff debts in addition to the mortgage(s). For instance, a borrower might have several credit cards and a student loan that they would like to roll into one easy payment. A cash out refinance transaction would payoff all of the debts at closing.

Also, Fannie Mae and Freddie Mac have determined that if a borrower is paying off a home equity line of credit or a second mortgage with a refinance loan, the transaction is considered a cash out refi unless the second mortgage was used to purchase the home originally.

With this knowledge, you should be a refi expert in no time!

To view our list of recommended mortgage refinance companies online, visit this
page: Recommended
Mortgage Refinance Companies Online.

Carrie Reeder is the owner of ABC Loan
Guide, an informational website about various types of loans.

Tournament Woes. I was playing a little poker game not too long agoit was a home game and none of us were taking it too seriously. Well, I finished third. We played tournament style, paid out 30/70 between 2nd and 1st place. And I finished third.

This is the kind of thing we all experience, at least you do if you play regularly. You get that “so close” feeling, all those should-have-done-this or would-have-done-that moments you replay just after you give up that final poker chip.

But for some reason, we keep coming back. I don’t know about the rest of you, but I tend to get all introspective after a tough loss like that. I start thinking about the game, thinking about the stock we put into it, the seriousness we play with even when we’re not trying to make the game a “serious” game.

It just kind of happens that way. And back to my thoughts, I’m thinking, “It’s such a simple game. You draw two cards. You bet. You win or lose after the cards are ranked.”

I was astounded by how simple the concept is. I was more astounded by the complexities that take place between those three simple steps. And I was still mulling over the fact that I finished 3rd. Such a psychological rollercoaster is this game, but for some reason, some unknown force perhaps my own ego, I keep coming back. Wash. Rinse. Repeat.

I keep thinking about this, and remain astounded at the mystique of the game of poker. How such simplicity, when we dig a little deeper can be so complex.