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Mortgage Refinance 2010 Is Problematic
A thirty year fixed home mortgage refinance is currently priced between 4.750% and 5.250% charging the property owner minimal or no points for a Rate and Term refinance. The home loan rates change daily for home loans depending on market conditions, but haven't deviated from this range since last year.
Each lender has the choice to offer their service portfolio a government stimulus refinance product 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 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 plan is beneficial for borrowers who have suffered the loss of a percentage of their earnings and/or devaluation of their home due to general economic conditions. This product offers help to homeowners who have fallen past due 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 homeowner must be employed and cannot have become self-employed in the last 2 years.
The refinance must show an advantage to the homeowner by lowering interest rate percent and monthly payment or taking the property owner from an ARM or pay option ARM to a fixed program.
*Also note the product will not allow a borrower to refinance home equity lines of credit. Second mortgages are subordinated to allow the refinance to proceed.
When refinancing your mortgage, requesting your current mortgage company's version of the "Making Home Affordable" program should be enough to let your lender know the specific program you're interesting in exploring.
The stimulus refinance product 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 loan is basically a streamline refinance, but with the added advantage of no appraisal. In this financial atmosphere of declining market values and rampant employment 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 as the stimulus plan cannot make the change from a government loan to a conventional conforming program. FHA and VA 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 monthly payment, but a borrower 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 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 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 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 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.
Contact your current banker for information specific to your mortgage loan.
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