Mortgage Refinance 2010 Is Complex



A thirty year fixed home mortgage refinance is presently priced from 4.750% to 5.250% charging the borrower minimal or no points for a no cash out refinance. The rates fluctuate daily for home refinances depending on economic conditions, but haven't changed much from this range since last year.

Each bank has the option to offer their service portfolio a government stimulus refinance product from the U.S. Department of Treasury called the "Making Home Affordable" Plan. This home mortgage loan product allows home mortgage refinance with property valuation from the mortgage company's automated valuation process and also allows underwriting guidelines with a higher debt to income ratio than typically 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 approach is advantageous to borrowers who have suffered the loss of a percent of their earnings and/or devaluation of their home due to general industry conditions. This product offers help to borrowers 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 have a job and cannot have become business owners in the last 24 months.

The refinance must show an advantage to the borrower by dropping rate and payment or taking the property owner from an ARM or pay option ARM to a fixed product.

*Also note the package will not allow a borrower to refinance home equity lines of credit. Lines of credit are subordinated to allow the refinance to proceed.

When refinancing your mortgage, requesting your current bank's version of the "Making Home Affordable" plan 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 ARMs. The mortgage package 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 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. Borrowers currently in an FHA or VA loan should use this option because the stimulus plan cannot make the change from a government loan to a conventional conforming program. FHA and VA loan rates are about the same as 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.

Buying down the rate will allow an even lower monthly payment, but a borrower should plan to remain in the house long enough to recoup the cost of the points paid. Each point represents 1% of the loan amount. The closing costs may be rolled into the loan and refinanced as well so that no out of pocket expense will be paid by the homeowner.

Rates for loans less than a 30 year term are not as low. It appears bankers 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.

Call your current banker for information specific to your mortgage loan.

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