Is Putting Money Down Required in Mortgage Refinancing?

Is Putting Cash Down Required for Refinancing- 150x150When the refinancing issue is brought to the homeowner’s table, especially when current mortgage interest rates make the option a very favorable consideration, there are the usual ‘costs’ to be factored into the feasibility equation. In the case of refinancing, one of the variables being eliminated is the need for putting down payments into the process, as was required for the original home purchase. Bringing money to the lender’s table in a mortgage refinance is an exception to the normal procedure, and not a standard requirement, which makes the entire concept very appealing for a number of reasons. The only time it might be necessary would be if there is a lack of sufficient equity in the home, or if there is a debt pay-off needed to qualify for the financing.

Money Down is an Option

The basic premise in refinancing is to accomplish a few strategic and money-saving goals. The decision is based on what type of loan package was negotiated at the time of purchase, and what the interest rates were set at by the lender at the time. Therefore, the tactic is to either lower the interest rate, change types of mortgage loans, change the length of the loan term, or tap into the equity resource for cash. There is also the choice of folding the closing costs of the new loan right into the loan itself, which makes the ‘money down’ issue even more attractive. This choice, however, means increasing the overall loan amount, as well as paying more interest in the long run.

More Money Down = Lower Interest Rate

Naturally, when a homeowner chooses to apply any amount of funding toward the refinancing process, if only to lower the loan principle, it will of course reduce monthly mortgage payments. If enough money is brought to the table, there is a good chance the lender will lower the interest rate. This is because the lower loan amount is compared to the current value of the home itself. More funds brought to the closing may also eliminate the need for private mortgage insurance.

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