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Home Mortgage Refinance In Today's Economic Atmosphere Is Complex
A thirty year fixed home mortgage refinance is presently priced between 4.750% and 5.250% charging the borrower minimal or no points for a no cash out refinance. The rates shift daily for home loans depending on market conditions, but haven't deviated from this range since last year.
Each mortgage company has the option to offer their service portfolio a government stimulus refinance product from the U.S. Dept of Treasury called the "Making Home Affordable" Plan. This home mortgage loan program allows home mortgage refinance with property valuation from the mortgage company's automated valuation process and also allows underwriting guidelines with a higher debt to income ratio than traditionally 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 program is beneficial to borrowers who have undergone the loss of a portion of their income and/or devaluation of their home due to general industry conditions. This plan offers help to borrowers who have fallen past due in their monthly mortgage payments.
What the Plan Will Not Allow:
The automated appraised value cannot show the property value over 105% of the current loan amount, 110% in certain cases.
The borrower must be employed and cannot have become business owners in the last twenty four months.
The refinance must show a benefit to the borrower by dropping rate and monthly payment or taking the property owner from an adjustable rate mortgage or pay option ARM to a fixed plan.
*Also note the package will not allow a borrower to refinance second mortgages. Second mortgages are subordinated to allow the refinance to proceed.
When refinancing your mortgage, requesting your current bank'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 product 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 package 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 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 presently in an FHA or VA loan should use this option because the stimulus plan cannot make the change from a government loan to a conventional conforming program. Government loan rates are comparable to 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 rate, but a borrower should plan to remain in the house long enough to recoup the cost of the points paid. Each point represents 1% of the loan amount. The costs to close the loan may be rolled into the loan and refinanced as well so that no out of pocket charges will be incurred by the homeowner.
Rates for loans less than a 30 year term are less attractive. It appears bankers 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 suggested a homeowner 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 banker for information specific to your mortgage loan.
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