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Mortgage Refinance Today Is Challenging
A thirty year fixed home mortgage refinance is currently priced between 4.750% and 5.250% charging the home owner minimal or no points for a no cash out refinance. The home loan rates fluctuate daily for home loans depending on economic conditions, but haven't changed much from this range since April 2009.
Each lender has the advantage to offer their current customers a government stimulus refinance product from the United States Department 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 qualifying 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 program is helpful to property owners who have suffered the loss of a portion of their earnings and/or devaluation of their home due to general economic conditions. This program offers assistance to homeowners who have fallen past due in their monthly house 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 homeowner must have a job and cannot have become self-employed in the last 2 years.
The refinance must show a benefit to the property owner by dropping interest rate percent and payment or taking the property owner from an adjustable rate mortgage or pay option ARM to a fixed product.
*Also note the program will not allow a borrower to refinance second mortgages. Second mortgages are subordinated to allow the refinance to proceed.
When refinancing your mortgage, asking for your current bank's version of the "Making Home Affordable" package should be enough to let your lender 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 ARMs. 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 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. Homeowners currently 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 about the same as 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 rate, but a homeowner should plan to remain in the house 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 charges will be paid by the borrower.
Rates for loans less than a 30 year term are less attractive. It appears lenders are more interested in locking in a long term customer 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.
Call your current banker for information specific to your mortgage loan.
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