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Mortgage Refinance Today Is Challenging
A thirty year fixed home mortgage refinance is presently priced between 4.750% and 5.250% charging the home owner minimal or no points for a no cash out refinance. The rates change daily for home refinances depending on financial conditions, but haven't changed much from this range since last year.
Each mortgage company has the advantage to offer their current borrowers a government stimulus refinance product from the U.S. Dept of Treasury called the "Making Home Affordable" Plan. This mortgage loan package allows home mortgage refinance with property valuation from the lender's automated valuation process and also allows underwriting guidelines with a higher debt to income ratio than normally 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 beneficial to property owners who have undergone the loss of a percent of their earnings and/or devaluation of their property due to general industry conditions. This plan offers aid to homeowners who have fallen behind in their monthly mortgage payments.
What the Plan Will Not Allow:
The automated valuation cannot show the dwelling value over 105% of the current loan amount, 110% in certain cases.
The borrower must have a job and cannot have become business owners in the last 24 months.
The refinance must show a benefit to the borrower by lowering rate and payment or taking the property owner from an adjustable rate mortgage or pay option ARM to a fixed program.
*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 lender's version of the "Making Home Affordable" program should be enough to let your bank know the specific program you're interesting in exploring.
The stimulus refinance package refers 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 payment and a substantial monthly savings.
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 sizable monthly savings for most refinanced mortgages with rates around 5% from a median 6.5% a year ago.
Buying down the rate 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 buydown. Each point represents 1% of the loan amount. The closing costs may be rolled into the loan and refinanced as well so that no out of pocket expense will be incurred by the borrower.
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 property owner than short term ones. 3, 5 and 7 year adjustable rate mortgage 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.
Write your current mortgage company for information specific to your mortgage loan.
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