Options For Refinancing Your Home Mortgage
Refinancing your home mortgage can be a very beneficial decision to make in the current financial climate.
You may be keen to take advantage of lower mortgage rates, or change your mortgage term to a longer or shorter one. Alternatively you may want to release funds for debt consolidation, or to finance a major purchase.
However, a big problem for many homeowners is that lenders have made their criteria more stringent in the face of increasing demand, so it can be difficult if not impossible to get the best rates for a refinance unless you have an excellent credit score, plus at least 20 percent equity in your property. If you are underwater — that is, you owe more than your house is now worth — you may despair of getting a refinance at all. However, there are options for people in your situation, depending on who owns or insures your mortgage.
Refinancing Your Home Mortgage With The FHA
If your current mortgage is insured by the FHA or Federal Housing Administration, the best option for you may be an FHA Streamline refinance. The FHA Streamline will enable you to get a lower rate on your mortgage without having to go through a lengthy qualification process. It is simpler and less stressful, and you get your money faster than with most loans.
The Streamline is offered as a 15 or 30 year fixed rate mortgage, or a five-year ARM or adjustable rate mortgage. You have to be current on your payments to be approved, and the loan must reduce your payments by 5 percent or more. The big benefits are that no appraisal is required, and you do not have to provide verification of your credit, income or employment.
Government Help With Refinancing Your Home Mortgage An alternative option is to take advantage of the government’s Making Home Affordable Program, and refinance through the HARP, or Home Affordable Refinance Program. You will be eligible for this if your mortgage is owned or guaranteed by Freddie Mac or Fannie Mae, provided you originated before June 1, 2009 and are current on your payments. In addition, your loan to value ratio (LTV) must be more than 80 percent, and will mostly be over 100 percent.
An additional possibility for those with mortgages that are owned by Freddie Mac is the Freddie Mac Relief Refinance Program. This offers unlimited LTV ratios for fixed rate mortgages, and also provides relief from the standard insurance requirements for mortgages. To qualify, you must be in receipt of interest rate reduction or amortization term reduction.
Refinancing Your Home Mortgage As A Veteran
A further possibility if you are a veteran is the VA IRRRL, or Interest Rate Reduction Refinance Loan. You can only use this to refinance a mortgage if it is on a property which you purchased using your VA loan eligibility. In addition, the proceeds can only be used to pay off your existing VA loan.
Today’s declining property values mean more and more people have underwater mortgages. Those who are fortunate enough to have equity in their homes have plenty of opportunities to avail themselves of the current exceptionally low mortgage rates, but for others it is not so easy. However, there is no need to despair — talk to your lender to find out what is the best option for refinancing your home mortgage.