FHA Refinance Mortgages

2007-03-08 10:33:40

( Financial )



FHA refinance mortgages, also known as Federal Housing Authority streamline mortgages, are for individuals who have an existing FHA loan, and wish to take advantage of lower monthly payments, and mortgage refinance rates. FHA refinance mortgages are taken out to either extend or shorten the repayment term of the loan.

To qualify for FHA refinance mortgages, the loan to be refinanced must be a federal FHA loan, the mortgage must be at least six months old, and you must be up to date with your mortgage and any other federal debts for the last twelve months.

There are different programs for FHA refinances that offer 15 and 30-year terms:

Fixed rate loans provide fixed annual interest rates, and are not affected by any rise in market interest rates. If you decide to pay for your mortgage early, you will be liable to pay for certain penalties. In addition, because the refinance interest rates are fixed, you will not be allowed to restructure your mortgage when interest rates fall.

Mortgage refinance rates and monthly payments for FHA adjustable rate mortgages vary during the life of the loan, as rates depend on the financial index. Adjustable rate mortgages have lower refinance interest rates than fixed rate loans, and can give you further savings if the interest rates drop further. No penalties are charged if you decide to pay early, and you can refinance as many times as you wish during the life of your loan. Adjustable rate mortgages can be converted to a fixed rate mortgage when lower refinance interest rates become available.

Buy-down loans enable you to obtain lower refinance interest rates for the first two years, but you requires the prepayment of interest rates in advance. As a result, you will be able to get a larger loan amount and lower monthly payments for the first five years.

FHA refinancing can be done with or without an appraisal. Refinancing without an appraisal is a good option for those who simply wish to take advantage of lower mortgage refinance rates. There is no need to assess the value of the property, or make any credit investigations.

FHA refinancing with an appraisal is a good option for homeowners who want to take cash out from the equity of their house. Financing companies will however need to appraise the property to be refinanced, and make credit, employment and income evaluations, and will result in higher monthly payments.

If you cannot afford to pay for the closing costs and other fees involved in a FH refinance, you can apply for a “no-cost” refinancing mortgage. This means that the lender will pay for all of your closing costs, but demand higher mortgage refinance rates. You can also request for the closing costs to be included in your mortgage, but this will result in higher monthly payments.


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