Refinancing when home value increases

[Anonymous]

Good day.  I have a question regarding refinancing.  Say I get an initial mortgage for a house that is appraised at 300,000.  I then decide to refinance say, after 5 years.  If the home value after the initial 5 years increases to 400,000, does that mean the loan I get with refinancing is for the 400,000 instead of the 300,000 initial mortgage?  Would that then mean that payments could potentially be higher even if the rates are lower?  Or do I get the 100,000 as equity, and refinane the mortgage based on the original 300k mortgage?  Thanks so much!  Hope this question isn't too confusing.

[Anonymous]

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@Anonymous wrote:

Good day.  I have a question regarding refinancing.  Say I get an initial mortgage for a house that is appraised at 300,000.  I then decide to refinance say, after 5 years.  If the home value after the initial 5 years increases to 400,000, does that mean the loan I get with refinancing is for the 400,000 instead of the 300,000 initial mortgage?  Would that then mean that payments could potentially be higher even if the rates are lower?  Or do I get the 100,000 as equity, and refinane the mortgage based on the original 300k mortgage?  Thanks so much!  Hope this question isn't too confusing.

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The $100,000 is your equity, and your new mortgage loan amount would the remaining principal balance from the previous mortgage.

Your loan-to-value (LTV) will be your new loan amount (aka previous remaining balance) divided by new appraised value. This can help in potentially reducing or removing mortgage insurance that you may have had on your previous loan.

[Anonymous]

Thank you so much for your reply.  I've only recently considered ARM's, and thought of it as an option if I did 7/1 and refinance to a 15 year fixed on the 6th/7th year.  Will have to do a lot of consideration over the weekend.  The jump in rates this week got me looking at options!