Mortgage Refinance In Today's Market Is Complex
A thirty year fixed home mortgage refinance is currently priced between 4.750% to 5.250% charging the home owner minimal or no points for a Rate and Term refinance. The rates change daily for home loans depending on market conditions, but haven't deviated from this range since April 2009.
Each mortgage company has the chance to offer their current customers a government stimulus refinance program from the U.S. Department of Treasury called the "Making Home Affordable" Plan. This mortgage loan plan allows home mortgage refinance with property valuation from the lender's automated valuation process and also allows qualifying 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 package is helpful for borrowers who have suffered the loss of a portion of their income and/or devaluation of their property due to general economic 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 property value over 105% of the current loan amount, 110% in certain cases.
The borrower must be employed and cannot have become self-employed in the last twenty four months.
The refinance must show an advantage to the property owner by lowering rate and payment or taking the customer from an adjustable rate mortgage or pay option ARM to a fixed program.
*Also note the program will not allow a borrower to refinance second mortgages. Lines of credit are subordinated to allow the refinance to proceed.
When refinancing your mortgage, asking for your current lender's version of the "Making Home Affordable" plan should be enough to let your mortgage company know the specific program you're interesting in exploring.
The stimulus refinance plan 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 loan is basically a streamline refinance, but with the added advantage of no appraisal. In this economic atmosphere of declining market values and rampant employment losses, it allows a lower monthly mortgage 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 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 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.
Paying points will allow an even lower monthly payment, but a homeowner should plan to remain in the home 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 charges will be incurred by the borrower.
Rates for loans less than a 30 year term are less attractive. It appears mortgage companies are more interested in locking in a long term customer 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 borrower set up their home mortgage refinance on a 30 year term, but make the 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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