If you're looking to save some money on monthly bills, you should consider taking a look at your mortgage. Although the housing industry isn't a seller's market right now, you can still get good deals on refinancing options.
Refinancing can be an especially good idea if you find yourself out of a job or if you're one of millions who bought a home they couldn't afford.
Streamline refinancing is designed to make the process of refinancing easy. By and large, there are only a few basic requirements in order to qualify for streamline refinancing, which are:
- Your mortgage loan has to be in good standing (no delinquency, or anywhere near foreclosure, basically)
- The loan has to be insured
- The purpose of streamline refinancing is to lower the monthly payment
- You can't get any cash back from the refinance
A fixed-rate loan is very safe, since you know exactly how much you'll be paying for the life of the mortgage (well, you might end up paying less if you are lucky; since when rates go down, nobody can stop you from refinancing again at better rates!).
Adjustable Rate Mortgage
With an ARM, the future is less predictable. Typically, ARM loans have a few years of a fixed rate, and then they revert to a variable rate. The variable rate will change with the market conditions. In the worst case, you may end up paying very high interest rates (for example, if serious inflation hits several years down the road).
Cash-out or Not?
If you decide to go with cash-out refinancing, you would normally pay much higher interest rates. However, many people still choose this option for many reasons. You might want to pay off credit card debt, make some home improvements, beef-up your emergency fund, or just take a nice family vacation.
The dangers of cash-out refinancing are pretty obvious: if your financial discipline is not perfect, you will quickly spend the cash and end up with a larger loan and no additional assets or income to pay it off. Even if you think you can live with bigger interest payments today, you make yourself more vulnerable to various financial problems that result from a layoff, emergency medical costs, investment losses, etc.
Have Limited Equity?
Refinancing with limited equity is doable. The best way for you to pursue refinancing with limited equity might be to get it from the Federal Housing Administration (FHA). FHA refinance loans can definitely help people who are hoping to refinance with limited equity. Since the mortgage payment is reduced, those risking foreclosure will be able to avoid it, and can get cash out to consolidate bills or even help improve their home value. FHA refinancing also has terms that are easy to understand with low costs involved, and the loans don't require standard credit demands (i.e., strong or perfect credit). However, FHA loans have eligibility requirements that you must meet in order to qualify for refinancing with limited equity programs. You can refer to the Federal Home Administration website for information on the qualifications.
There are plenty of refinancing options available no matter what your budget mortgage size is. The trick is to be diligent and investigate several scenarios for refinancing. Will extending your mortgage lower your payments? Will an annual payment help? Find a good mortgage calculator online and spend a few minutes looking at your options before committing.
Provided by Mortgage Rates at Go Banking Rates.