Arefinance of your home loan is simply paying off your existing mortgage(s) withthe proceeds from a new loan. It's also important to note that there are twodistinct types of refinances and depending on which option you decide upon tomeet your needs, you will have to follow and meet certain criteria in order toqualify for the loan. These two types of refinance transactions are known as'No Cash-out' and 'Cash-out' mortgages.

  ANo Cash-OutRefinance transaction is typically referred to as a'Rate and Term' refinance amongst mortgage brokers and lenders because the soleaim of this transaction is to either lower the interest rate and/or term ofyour mortgage. For example, if you purchased your home with a 30 year fixedrate mortgage that has a 7.25% interest rate, a 'Rate and Term' refinance wouldhelp you lower the interest rate to a 6.25% loan and/or change the term from a30 year fixed rate mortgage to a 15 or 20 year fixed rate loan.

  Avery important point to remember is that at the time of funding, you may notreceive over $2,000 in loan proceeds or 2% of the loan amount (which ever isless) to have your refinance be considered a 'No Cash-out' transaction underFannie Mae conventional lending guidelines. A Rate and Term refinance is alsocheaper, less expensive loan option because the lender carries less risk than aCash-out refinance.

  A'Cash-out' MortgageRefinance is when a home owner takes out a slightlyhigher loan amount and receives that small increase as 'cash' at closing. Thisloan option typically involves what brokers and lenders refer to as 'add-on'pricing which increases the costs or interest of your loan. The increase isvery minimal depending on how much you want to cash out on. Typical reasons whya home owner many want to cash out some of their equity is to pay-off highinterest credit card debt which will help you save considerably on interestpayments. The other most common reason for a cash-out refinance is to havemoney available to repair or upgrade the home.

  Whilerefinancing your home loan for the first time can seem like a daunting taskwith all the different types of mortgages out there to choose from, you are nowequipped with the basic knowledge you will need to get started in the rightdirection. Remember that there are two distinct types of mortgage refinanceloans that will meet your needs, this is the 'Rate and Term/No Cash-out'mortgage and the 'Cash-out' options which every broker and lender has accessto. Past that, the loan application and qualification process is almostidentical to when you applied for your mortgage as a first time homebuyer.