There has never been a better time to refinance than now. Home values are up which give Homeowners options – Cash-Out, Debt Reduction, Rate & Term and even Negative Equity programs are all available. The best Government program is a little-known government program called the Home Affordable Refinance Plan (HARP). This allows Americans to refinance their homes at shockingly low rates, and reduce their payments by as much as $12,000 a year.
But here’s the catch, like most government programs, this is likely temporary. But the good news is, once you’re in, you’re in. If the thought of a lower payment, fewer years on your mortgage, and even taking some cash equity out of the deal is appealing, the time to act is right now.
Act Now – Refinance Your home
We have seen huge real estate price increases over the past 24 months. Most of the home values in Southern California are within 80% of their former highs. Considering that some areas incurred losses in the 50% range this is a fantastic recovery. Yes there are some areas that are at all-time highs and others not enjoying the same recovery. The point of this article is to address home mortgage options given the increase in home values.
With the recent increase in property values everyone with a FHA mortgage should look into a refinance into a conventional loan. Most people will focus on the rate and miss the big picture. The big picture is, the “rate” plus the “mortgage insurance” cost. For example, an FHA mortgage originated just 12 months ago would have a rate of roughly 3.5% and a mortgage insurance rate of 1.3% for a blended rate of 4.8%. A conventional rate would be in the low 4% range, subject to your credit strength. Today the mortgage insurance never goes away. Also FHA loans originated prior to the change have to have the original principle balance reduced 78% before the mortgage insurance will be removed. The loan of value is irrelevant with a FHA loan.
Converting to conventional financing has many options for borrowers. In most cases your home’s value has increased enough to drop the mortgage insurance. For people with incomes in in the $100,000 range this is huge as mortgage insurance is not tax deductible is larger income people.
There are some other people that could benefit from a debt reduction mortgage and yes you can payoff debt to qualify. If anyone runs into this road block please contact me and I will let you know of a few companies that can help you. Debt reduction loans allow for you to restructure your debts into a more manageable structure. For example if you are in need of a new car you could obtain some extra cash to purchase a new car cash and keep your mortgage payment the same and in some case even reduce the payment.
As always I would recommend you contact your bank and a mortgage broker so you can see what your best options are. In most cases a smaller direct lender company will offer the best rates with the lowest loan fees.