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Chris Salese

In the spirit of that traditional summer treat — the standard ice cream cone — there’s usually three basic flavors to consider when waiting in line to place your order.

I’m, of course, talking about vanilla, chocolate and strawberry.

In a similar fashion, there also are three different flavors of a refinance when it comes time to selecting the loan program that makes the most sense for you.

The first choice is called a “rate and term” refinance.

If you’re looking to change out your current rate for a different one or switch to a shorter or longer amortization schedule, then this is the option for you.

In fact, under this option, you can both adjust your rate and the amortization schedule when you take out your new loan. In most cases, depending on the strength of your overall application, the prevailing market interest rates should be the lowest of all the refinance options.

Another refinance flavor is the “delayed purchase” refinance.

This is used when your property was purchased under an all-cash transaction within six months of your refinance loan application.

Although you might be able to reduce this time frame down to three months, typically six months is the threshold for being able to leverage this product. In order to fit within the guidelines, you must be able to prove that you’re the owner of the property, there are no liens against it and the funds used to purchase the property can be fully documented and sourced.

Assuming you can check all the appropriate guideline boxes, the “delayed purchase” refinance is a great option because the loan will be treated for rate purposes like a “rate and term” refinance, despite you actually taking cash-out to replenish your asset accounts used to purchase the property with all cash.

In fact, you can even use this with investment property purchases as long as you are not a builder or in the construction industry and your prior purchase transaction was considered arm’s length.

The third flavor is commonly referred to as a “cash-out” refinance.

This is where you can pull money out of your property and smartly use it in a variety of different ways. Generally speaking, rates are a tad higher and you must have owned your property for at least six months to qualify for standard “cash-out” refinance program options.

Otherwise, you would need to elect the “delayed purchase” refinance option and will be restricted to taking cash-out only to replace the funds used to purchase the property instead of being able to direct your cash-out funds for anything else you want to do.

Regardless of your desired ice cream or refinance flavor, there can be numerous sprinkles or wrinkles within each one that require the careful guidance from your server or lender to help navigate you through them.

For example, you can receive cash back at closing under a “rate and term” refinance. However, the maximum cash back at closing is usually limited depending on the type of product or loan.

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Chris Salese can be reached at or (707) 363-4439. He is a licensed California mortgage banker (NMLS 254469 /1850 CA BRE 01377933/01215943) and equal housing lender.