REFINANCING

  Have you refinanced yet?  Interest rates have been low for quite some time now, however, not everyone pays attention to interest rates the way I do on a daily basis. (Hard to understand, I know.)  Anyway-I would like to remind everyone that we are in an abnormal situation with regard to rates.  I know many people are accustomed to interest rates in the 4's as that has been the norm since 2008-but in reality the normal range of rates is between 6.5% to 7.5%.   I also know that there are still quite a few people who own mortgages that are pre-2008 and at these higher rates.  The good news is that there is still time to get your home refinanced before rates begin to go up for good.

  There are several types of refinance programs that are worth mentioning:

1) FHA streamline refinance-if your FHA loan closed before May 31, 2009 you would be eligible for what is known as a streamline refinance with reduced mortgage insurance. The streamline refers to the fact that the only credit qualification required is a middle credit score of 640, and a 12 month on time payment history of your mortgage.  You will not have to obtain a new appraisal and your current balance will remain the same. FHA requires a 5% decrease in your monthly payment to approve this loan-but if you have an interest rate over 5.5% this may be a good way to reduce your payment at very little cost to you.

2) VA IRRL-The VA interest rate reduction loan is just the ticket for a veteran that wants to decrease his payment. Many lenders require a credit score of 640 on VA loans, so the borrower must keep that in mind.  Closing costs can be rolled into the new loan and credit qualification is not required.  If the veteran wishes to take cash out of a refinance transaction to pay bills or for other projects the IRRL will allow a mortgage up to 90% of the value of property. The refinance can go up to 100% of the value of the property if the loan is to reduce the rate only.

3) Conventional refinances- if you have a conventional loan and have some equity attached to your property you may want to see if you qualify for a refinance call DU+.  In many cases no new appraisal is required assuming sales in your area bear out the new loan amount of your home.  You may roll closing costs into your loan, however you can only pay off the existing balance of your old loan if you want to avoid a new appraisal.  Another conventional product HARP can be used to refinance under water properties-however-it can only be used to refinance a first mortgage.  Typically if you wish to roll a second mortgage into a new first mortgage there is no shortcut. You will have to do a full blown credit qualifying refinance which means appraisal and all supporting documents will have to go with the file. In some cases it makes sense to move from an FHA loan to a conventional loan if credit and loan to value considerations are met.

4)  It is important for folks who have the financial ability to consider reducing the term of their loan.  Since rates are low, if you can turn that 30 year loan into a fifteen year loan you will save many thousands of dollars in interest.  In some cases, due to the low interest rates I have been able to reduce the term of a mortgage and the payment has not been much more than the original 30 year loan. For folks who will be empty nesters soon, this may be the way to add equity quickly to their home.

5)  Since the mortgage meltdown, there has not been much of an appetite for adjustable rate mortgages (ARMS).  However, I would be remiss if I didn't mention that for those who have a good idea of how much longer they are going to be in their homes (and again I am speaking to folks who know they will sell due to change in family size, or job change within a few years) an ARM may be the right product for you. Each case has to be assessed on and individual basis but with ARMS that are fixed for periods of 3,5 and 7 years-this could be a product that is at a lower rate and poses no risk assuming it will be paid off in a finite period.

  When looking at the advisability of refinancing a home loan each situation is different.  It is important that the consumer know what it is that he has to gain when considering the product.  My best advice? If it makes sense, what are you waiting for?  Do it before rates go up.