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Mortgage Refinance In Today's Economic Atmosphere Is Complex
A thirty year fixed home mortgage refinance is currently priced between 4.750% and 5.250% charging the borrower minimal or no points for a no cash out refinance. The refinance rates fluctuate daily for home refinances depending on market conditions, but haven't changed much from this range since last year.
Each bank has the option to offer their current borrowers a government stimulus refinance program from the U.S. Department of Treasury called the "Making Home Affordable" Plan. This mortgage loan product allows home mortgage refinance with property valuation from the bank's automated valuation process and also allows qualifying with a higher debt to income ratio than generally allowed.
The stimulus refinance program refers to the refinance of 30/20/15/10 year fixed mortgages. Some lenders added the 5/7/10 year ARMs.
This package is helpful for borrowers who have undergone the loss of a portion of their wages and/or devaluation of their home due to general economic conditions. This product offers aid to borrowers who have fallen behind in their monthly house payments.
What the Plan Will Not Allow:
The automated appraised value cannot show the home value over 105% of the current loan amount, 110% in certain cases.
The borrower must have a job and cannot have become self-employed in the last 24 months.
The refinance must show an advantage to the property owner by lowering interest rate and monthly payment or taking the customer from an adjustable rate mortgage or pay option ARM to a fixed package.
*Also note the product will not allow a borrower to refinance home equity lines of credit. Lines of credit are subordinated to allow the refinance to proceed.
When refinancing your mortgage, requesting your current mortgage company's version of the "Making Home Affordable" plan should be enough to let your bank know the specific program you're interesting in exploring.
The stimulus refinance program pertains to the refinance of 30/20/15/10 year fixed mortgages. Some lenders added the 5/7/10 year adjustable rate mortgages. The mortgage plan is basically a streamline refinance, but with the added advantage of no appraisal. In this economic atmosphere of declining market values and rampant job losses, it allows a lower monthly mortgage payment and a savings every month..
Government VA and FHA home loans still allow the Interest Rate Reduction Loans with no appraisal except under certain circumstances. Borrowers currently in an FHA or VA loan should use this option as the stimulus plan cannot make the change from a government loan to a conventional conforming program. Government loan rates are about the same as conventional conforming rates. Both translate to substantial savings every month for most refinanced mortgages with rates around 5% from a median 6.5% a year ago.
Paying points will allow an even lower monthly payment, but a homeowner should plan to remain in the property long enough to recoup the cost of the points paid. Each point represents 1% of the loan amount. The closing costs may be added into the loan and refinanced as well so that no out of pocket expense will be incurred by the homeowner.
Rates for loans less than a 30 year term are not as low. It appears mortgage companies are more interested in locking in a long term borrower than short term ones. 3, 5 and 7 year ARM loans give no measurable break in interest rate from a 30 year fixed. It is thought a borrower set up their home mortgage refinance on a 30 year term, but make the monthly payment based on the payment for the term they wish.
Contact your current lender for information specific to your mortgage loan.
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