Got Equity? Here Are 4 Great Refinancing Programs to Consider
Whether you’re looking to shave a few bucks off your monthly mortgage payments, or need to tap into some of the equity in your home to pay off a huge expense, a refinancing program can be the trick. If you’ve got equity in your home, you may qualify for a mortgage refinancing program. The first step is to determine precisely what your goal is, then find out which refinance program in particular suits your needs.
Check out the following 4 refinancing programs out there for home owners with a decent amount of equity already built up in their homes.
Traditional Refinancing Program
Conventional mortgages – which are guaranteed by Fannie Mae or Freddie Mac – can be refinanced so that homeowners can lower their interest rate, move from an adjustable rate to a fixed rate, or cash out. Refinancing a conventional mortgage is the most common refinancing option, and requires more stringent criteria compared to other types.
For instance, you would have to verify your employment status and income amount, and you’ll also need a decent credit score, preferably over 620. In addition, an appraisal of the home will be required. But all the hoops you might have to jump through might well be worth it for the money you can save going from a high interest rate to a much lower one.
FHA Streamline Refinancing Program
If you’ve currently got a Federal Housing Administration (FHA) mortgage on your home, then you can take advantage of an FHA Streamline Refinancing program. These are the quickest and easiest ways for homeowners with existing FHA loans to refinance a mortgage in order to lower monthly payments.
Even if your credit score isn’t exactly the greatest, you can still get approved for this type of refinancing program, since there is no credit score verification required. However, your payment history might be looked at. Home owners also like the fact that there is no income or employment verification involved either.
This process is not long-winded at all, compared to a conventional mortgage refinancing program. No appraisal is required, which is actually the defining trait of the program. The FHA just uses the original purchase price of your home as its current value, regardless of what the place is worth today. The FHA doesn’t care if you’ve defaulted on your mortgage – it will refinance your home without smacking you with any additional penalty fees.
So basically, you can be unemployed, have a terrible credit score, and not have a dime in home equity, but you can still be approved for an FHA Streamline Refinancing program. How is this even possible?
The truth is, the FHA’s main role is to insure mortgages, and not approve them or give them out. It’s in the FHA’s best interests to get as many home owners as possible to qualify for the ultra-low mortgage rates that are currently being offered. The lower the mortgage rate, the less risk of loan defaults.
VA Streamline Refinancing Program
Veterans and active-duty soldiers who currently have a Veterans Affairs (VA) loan can qualify for a VA Streamline program. In fact, these are exactly the type of people that this program was specifically designed for. Even spouses of those who have been killed in the line of duty might be able to qualify for such a refinancing program. Much like FHA refinancing, home owners can cut their monthly mortgage payments through lower interest rates without having to cash out their equity.
Anyone who’s served in the military can essentially buy a house without any money down through the VA Streamline Refinancing program. There are no mortgage insurance fees, no credit score checks, no income or employment verification, and no appraisals needed. Not only that, but the interest rates are extremely low, which can help veterans save thousands of dollars when refinancing.
Also referred to as the Interest Rate Reduction Refinance Loan (IRRRL), this program allows vets to roll their closing costs into the price of the loan, without having to outright pay for any expenses related to the refinancing program. If you’re a veteran or are currently on active duty, you can use this notable position to your advantage and save on low interest rates with a VA Streamline Refinancing program.
Cash-Out Refinancing Program
If you’ve got a huge expense to pay off that requires a large sum of liquid cash up front, then a cash-out refinancing program might be right for you. Some of life’s more pricey expenses can be challenging to cover all in one shot, including home renovations, college tuition fees, or emergency medical expenses. If you’ve built up a certain amount of equity in your home, you can take this money out and use it to pay off such large debts.
For example, if your home is worth $400,000, but your outstanding principle on the mortgage is $200,000, you have $200,000 worth of equity in your home. If you need $50,000 to pay for a new kitchen, you can do a cash-out refinance to take this money out. Your new loan would then be worth $250,000 (the $200,000 you still owe, plus the $50,000 withdrawn).
Just we wary that you’ll have to pay out closing costs with a cash-out refinancing program, just like you would with a traditional refinanced mortgage. Not only that, but you’ll also be stuck paying interest on the money you take out.
With interest rates still low, it often makes sense to refinance your mortgage. Whether you want to lower your monthly mortgage payments or need to cash out on the equity of your home, refinancing your mortgage through one of the above programs can be the ticket. Sit down with your mortgage broker to work out the numbers and see if mortgage refinancing is right for you.
